Amid Financial Scandals, Three Candidates for SEC Chairman

Obama's pick will play a role in cleaning up the mess on Wall Street.

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President-elect Barack Obama's transition team is said to be considering three potential financial experts to replace Christopher Cox as chairman of the Securities and Exchange Commission. It's an appointment that is drawing attention beyond the usual financial circles because of the collapses in the investment banking world and, most dramatically, the scandal surrounding prominent financier Bernard Madoff, who is accused of committing one of the biggest frauds in Wall Street history while avoiding regulatory scrutiny from the SEC.

According to Wall Street sources, the three are Gary Gensler, a former treasury undersecretary and Goldman Sachs official; Harvey Goldschmid, a former SEC member; and New York Insurance Commissioner Eric Dinallo. "All three are highly regarded, and we'd be fine with them," said a Wall Street source.

The chairman serves at the pleasure of the president, meaning that Cox would be replaced by Obama. He could still stay on as an SEC member, but typically the chairman leaves the SEC after being replaced.

Some in Congress want Cox ousted now, especially in light of the Madoff scandal, but administration officials say that Cox won't be pushed out.

The SEC, which is supposed to be Wall Street's top cop, has drawn increasing criticism from Congress and from former regulators for failing to have acted on the various financial excesses that have contributed to the current economic crisis. In the wake of Madoff's arrest, Cox has sought to shift blame from the politically appointed five-member commission and put it on the agency's career enforcement staff, which has been constrained by years of budget cuts and measures to limit its authority.

SEC critics, including some former officials, say the Bush administration has eroded the effectiveness of the SEC's inspection and enforcement operations just as it has in the case of many other areas of regulatory oversight. Cox himself has drawn criticism recently over his reassuring public remarks about the major investment banking firms just a few days ahead of the near collapse of Bear Stearns before federal officials organized its emergency purchase by JPMorgan Chase.