SEC's Cox Hires Ex-Congress Budget Chief as Adviser Amid Crisis

By Jesse Westbrook

Oct. 8 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox hired a former head of the Congressional Budget Office as a senior adviser after lawmakers criticized the agency's actions in handling financial turmoil.

Cox hired Dan Crippen to help on a congressionally mandated review of accounting rules and ``new policy issues facing the commission in the current economic crisis,'' the SEC said in a statement yesterday. Crippen, 56, led the agency that forecasts budget deficits and surpluses from 1999 to 2003, the SEC said.

``Dr. Crippen has spent decades dealing with vital financial-policy issues at the highest level of government,'' Cox said in the statement. ``We look forward to drawing on his skills as we work to protect investors and restore confidence in our markets.''

Cox is bringing on Crippen and adding public relations staff after senators including Republicans Charles Grassley and Richard Shelby blasted his supervision of Bear Stearns Cos. and other investment banks. John McCain, the Republican presidential nominee, said last month Cox should be fired because the SEC let hedge funds ``turn our markets into a casino.''

Crippen worked in the Republican administration of Ronald Reagan before becoming CBO director, advising the former president during the savings and loans crisis and after the October 1987 stock-market crash.

He also was a founding partner and senior vice president of the Duberstein Group, a lobbying firm led by Reagan's former chief of staff, Kenneth Duberstein. Crippen didn't return a telephone call seeking comment.
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Public Relations Help

Cox also brought in Andrew Weinstein, a former spokesman for the Dulles, Virginia-based AOL unit of Time Warner Inc., and Erik Hotmire, a former spokesman for Republican U.S. Senator Sam Brownback, to help respond to press scrutiny.

Weinstein has more than 20 years of experience in ``media relations, crisis communications and public-policy strategy,'' according to a biography on the Web site of Widmeyer Communications. Widmeyer, which employed Weinstein, described him as AOL's ``top media strategist.''

He worked on former Senator Bob Dole's unsuccessful 1996 Republican presidential campaign and in the office of former House Speaker Newt Gingrich. The SEC hired Weinstein as a paid consultant and Hotmire will be a full-time employee.

``They were brought on to support our three-person press staff in the Office of Public Affairs to help us communicate with investors and the public during the current credit crisis,'' SEC spokesman John Nester said.

Inspector General

The SEC also has been faulted by Inspector General David Kotz, who in a Sept. 26 report said the agency failed to respond to ``numerous, potential red flags'' at Bear Stearns such as the securities firm's excessive borrowing and over-concentration in mortgage securities.

The Federal Reserve and U.S. Treasury orchestrated a forced sale of Bear Stearns to JPMorgan Chase & Co. in March to prevent the investment bank from collapsing and triggering a broader market panic.

Cox, a former Republican congressman who has said he plans to step down at the end of the Bush administration in January, announced Sept. 26 that the SEC would stop monitoring the capital, leverage and liquidity of securities firms after the two remaining companies scrutinized by the agency, Morgan Stanley and Goldman Sachs Group Inc., became banks overseen by the Fed.

The central bank has gained authority this year at the SEC's expense after Bear Stearns was sold and Bank of America Corp. bought Merrill Lynch & Co. Lehman Brothers Holdings Inc., the last of five securities firms overseen by the SEC, declared bankruptcy last month.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.