Larry Kudlow
The nomination of congressman Chris Cox to chair the Securities Exchange Commission is a brilliant stroke and an inspired decision by President Bush.

While the Californian will certainly not roll back the anti-fraud Sarbanes-Oxley provisions designed to tighten corporate accountability and financial management, he is likely to reinterpret some SEC rules in a much more investor- and business-friendly manner than did his predecessor William Donaldson. At times, Donaldson appeared to be contributing to an overly hostile regulatory climate for business. Watch Cox reverse this environment in his first 100 days. That said, Cox will insist on honest accounting and complete accountability from chief executive and chief financial officers. There will be no opening the door to number-fudging under Cox. But just as surely, a number of costly paper-work burdens will be reduced.

Cox, a former Reagan White House counsel who presently chairs the House committee on Homeland Security, is one of the best and brightest members of Congress. His credentials for SEC chair are impeccable. He is a former securities lawyer who did a lot of M&A work for tech companies in California. He is a forward-looking, Internet-minded visionary, and one of the leading advocates of the Internet tax moratorium. Certainly, he will favor electronic trading for the nation?s stock markets; NYSE reform can?t come quick enough for Cox.

Trial lawyers should beware. Cox has no patience for the Bill Lerach-type class-action lawsuits that arrive in court every time a company?s stock price dips. Securities litigation reform, especially the curbing of shareholder lawsuits, will surely be on Cox?s priority list. In fact, Cox was an author of the 1998 Securities Litigation Reform Act -- which made it more difficult for investors to sue for misconduct -- a bill that became law over President Clinton?s veto.

He?s also no friend of the immediate expensing of options. Instead he believes that free markets are efficient and are constantly pricing in options expenses. Black-Scholes-type option-pricing models are Sarbanes-Oxley overkill. Cox has little sympathy for them, according to Washington analyst James Lucier.


Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.
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