SEC keeps eye on liquidity in big securities firms

Rachelle Younglai

WASHINGTON, Aug 21 (Reuters) - The U.S. Securities and Exchange Commission is closely watching the liquidity of the five biggest U.S. securities firms and has not seen any financial weakness among them, SEC Chairman Christopher Cox said on Tuesday.

His comments come amid problems with U.S. subprime mortgages that have rocked markets and forced the Federal Reserve to cut a crucial rate to pump liquidity in the banking system.

Through an SEC supervisory program, Cox said his staff have been in constant contact with investment banks Goldman Sachs & Co, Merrill Lynch & Co (MER.N: Quote, Profile , Research), Bear Stearns Cos Inc (BSC.N: Quote, Profile , Research), Lehman Brothers Holdings Inc (LEH.N: Quote, Profile , Research) and Morgan Stanley (MS.N: Quote, Profile , Research).

"We have been able to keep in touch on a very regular basis and we are focused on, among other things, their liquidity," Cox told reporters after a news conference to commemorate the release of high-profile Chinese dissident Yang Jianli.

The SEC oversees securities firms in a similar way that the Federal Reserve oversees banks. The SEC program is designed to allow the agency to monitor and respond quickly to financial and operational weakness in the firms.

Cox also said the SEC would monitor procedures at credit-rating agencies like Moody's Corp (MCO.N: Quote, Profile , Research) and Standard & Poor's, which have come under intense scrutiny for how they rated mortgage-backed securities.

"We will not second-guess their recommendations. We will be very carefully focused on their procedures," he said.

The SEC has authority to regulate rating agencies by setting a clear path for them to register with the agency.

"Our authority from Congress, which we have implemented by regulation, is new and is essentially forward-looking only to the extent that there were anywhere in the market something worthy of SEC enforcement would we be looking back," Cox said.

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Source: "source".