McCain Throws Cox Under A Bus

"The chairman of the SEC serves at the appointment of the president and, in my view, has betrayed the public's trust," McCain told a rally in this battleground state. "If I were president today, I would fire him."

Geez. The SEC doesn't set capital standards, doesn't oversee investments and doesn't supervise consumer lending. But it has allowed short sales, enabling those greedy speculators to make money just betting on stock prices! John McCain doesn't see how that can help the economy of people who actually make stuff, so it must be wrong. Then again, Candidate McCain has admitted that economics isn't his strong suit, so maybe he isn't the best reference on the morality of trading.

The trouble is, Candidate McCain is fundamentally a moralist. He traces most problems to failures of integrity, and his ethics are country-club conventional rather than a product of his own contemplation. The country-club folks have a lot of common sense and their ethics aren't so bad, but they're founded on what worked last time. Not so helpful when we're dealing with something new. Candidate McCain can't ignore a historic financial seizure, so he has to say something, and he's gone after the regulator who can most plausibly said to have countenanced greed.

Meanwhile, Candidate Obama is signaling approval of Senator Schumer's and Representative Frank's proposal to legalize the default of subprime borrowers. Candidate Obama's economic policy was already the explicit reallocation of wealth through tax credits and the expansion of progressive taxation to fund retirement payments.

I don't hear any political force talking about improving productivity, or reforming market institutions to give participants incentives for behavior conducive to systemic stability. I don't see any awareness of the distortions created by government risk underwriting through mechanisms like the GSEs. I love John McCain's integrity and outrage, but it does little good when detached from a sound understanding of our system.