Cox's SEC Censors Report on Bear Stearns Collapse (Update2)

[gopbuster]

By Mark Pittman, Elliot Blair Smith and Jesse Westbrook
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Oct. 7 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox's regulators stood by as shrinking capital ratios and growing subprime holdings led to the collapse of Bear Stearns Cos., according to an unedited version of a study by the agency's inspector general.

The report, by Inspector General H. David Kotz, was requested by Senator Charles Grassley to examine the role of regulators prior to the firm's collapse in March. Before it was released to the public on Sept. 26, Kotz deleted 136 references, many detailing SEC memos, meetings or comments, at the request of the agency's Division of Trading and Markets that oversees investment banks.

``People can judge for themselves, but it sure looks like the SEC didn't want the public to know about the red flags it apparently ignored in allowing Bear Stearns and other investment banks to engage in excessively risky behavior,'' the Iowa Republican said in an e-mailed statement.

An unedited version of the 137-page study posted to Grassley's Web site Sept. 26 showed that Bear Stearns traders used pricing models for mortgage securities that ``rarely mentioned'' default risk.

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