Subject: File No. S7-12-07
From: Gilbert M. Erskine

August 5, 2007

SEC Chairman Christopher Cox has replied to the withering report of August 3rd of the joint Senate Finance and Judiciary committee investigation on the handling of the Gary Aguirre matter---

"We will follow up on the report and recommendations...with energy and urgency."

Well, excuse me if I have a great deal of scepticism about the SEC acting "with energy and urgency" on anything.

The SEC has admitted that there are gross abuses done by Reg SHO's grandfather clause, and yet insists the proposed changes to correct the abuses must first be entered in the Federal Register. After 3 years of studying the matter, the SEC now says it will not be entered in the Federal Register until maybe October, because "we're working on the wording."

If proposed changes in rules must be first be announced in the Federal Register, why was this not done for the change in the short sale uptick rule?

There have been an enormous flooding of phantom shares of NovaStar Financial in the market by abusive naked short sellers, who are attempting to destroy the company so they will never have to cover their positions. It's now beginning to look like they will succeed because of the slow, inept efforts of the SEC staff.

Gilbert M. Erskine