At the time President Bush named him S.E.C. chairman, Cox had served 17 years in Congress, where he stood out as one of the most effective pro-business representatives in a strongly pro-­business class of House Republicans. He took the helm at the S.E.C. during a period of corporate backlash against the agency and the stringent regulations imposed by the 2002 Sarbanes-Oxley Act. The departing chairman, Donaldson, was a Bush family friend who had been appointed by the White House with the expectation that he would temper the S.E.C.’s activism. Instead, he embraced the agency’s role as cop. The business community felt “that Donaldson was too tough on corporate America and Wall Street,” says a former enforcement official. “Cox was brought in to chill it out.”

Besides pulling back on enforcement, Cox also cut back on the S.E.C.’s new risk-assessment office, created under Donaldson to help the agency do a better job of anticipating financial upheavals. After the head of that office left, Cox didn’t replace him for nearly two years. Although Donaldson had authorized and filled eight positions and planned to expand the staff to 15, by 2007 the office was staffed mainly by part-timers, who in federal budget records were regarded as the equivalent of only two full-time workers. Cox says in response that he has allocated staff to other departments that he contends perform similar functions.

Also, under Cox, the commission loosened a key limit on short-selling in 2007, scrapping what’s known as the uptick rule, which is meant to forestall plunges in share value by allowing short-selling only when a stock is rising. A year later, after heavy short-selling threatened the survival of certain large financial companies, the S.E.C. temporarily restricted the short-selling of 19 mortgage-company and bank stocks.

Cox and other S.E.C. officials have said that it wasn’t possible to anticipate the effects of the real estate bubble’s bursting. And Cox has said he’s able to do more with less by prioritizing enforcement and oversight efforts. The S.E.C., he told Congress in July, has more than four dozen pending investigations into the credit crisis. Some relate to whether improper short-selling and insider trading spurred the Bear Stearns collapse. But some members of Congress and the federal government clearly aren’t impressed. The Treasury Department has proposed grabbing for itself and the Federal Reserve some of the S.E.C.’s most important powers, including enforcement authority over brokerages and investment banks. At a Senate hearing in May, Senator Richard Durbin, a Democrat from Illinois, faulted Cox for endorsing the White House’s request for only a minor increase in the S.E.C.’s budget for 2009. Durbin noted that Cox’s budget request would mean the loss of at least 94 more staff positions throughout the S.E.C. “Developments and trends in the market call for more, not less, vigilance, to protect investors,” Durbin stated in a press release following the hearing.

Cox, in an interview that he allows to go well beyond the allotted hour, defends his record and dismisses repeated interruptions from a secretary. He is adamant that he has stepped up enforcement: “We are redoubling our efforts in every way that we know how.” He attributes the decline in penalties to an inevitable shift in the mix of cases after the resolution of big accounting scandals in the first half of this decade.

Under his leadership, Cox says, the S.E.C. has become forward-looking “in ways that traditionally we might not have been.” And he takes great pains to present himself as a champion of the small-time investor.

After we’ve shaken hands and I’m nearly at the elevator, Cox summons me back to examine a column of framed mementos on his office wall. He’s often mentioned these items when testifying before Congress as symbols of his personal commitment to regulation. They relate to Samuel Insull, the Chicago electricity magnate whose company went bust in 1932, wiping out hundreds of thousands of investors and helping prompt the establishment of the S.E.C. in 1934. The display includes a photo of Insull and a check for $3.36 made out to Cox’s grandfather—all that he got back on a $6,000 investment in the company.

Almost from the moment Cox took office, former enforcement officials say, he began chipping away behind the scenes at the S.E.C.’s enforcement division—the largest and most high-profile of the agency’s four divisions. Approval of the enforcement division’s requests to initiate investigations, which was an expeditious process under former chairman Donaldson, turned into a logjam, as the commission closely scrutinized each one. “It was like someone poured molasses on the enforcement division,” says a former enforcement division supervisor.

When the commission was divided over cases, Cox would simply take them off its agenda. The same supervisor says, “You had cases where the enforcement staff had worked hard for three years. It was finally done, on the calendar. The general counsel has reviewed it. The day arrives for your hearing before the commission, and you’re told that morning it’s been pulled. Taken off the calendar. When’s it going back on? We don’t know.” By mid-2006, this had become routine. “Cases are held up, pulled, held up, pulled,” the supervisor says.

Cox’s treatment of Linda Thomsen, the S.E.C.’s first female enforcement director, was seen by staffers as a sign of the division’s declining clout. A longtime S.E.C. lawyer, Thomsen had been named director by Donaldson just prior to his departure. Her predecessor, Steve Cutler, who had worked closely with Donaldson and several earlier enforcement directors going back to Stanley Sporkin, who held the job in the 1970s, told me that this kind of open-door relationship was the norm. Several former senior S.E.C. staffers say Thomsen had far less access.