"I am pleased to announce my nomination of Congressman Chris Cox of California as our next chairman of the Securities and Exchange Commission," Bush said from the White House Roosevelt Room.
"Chris Cox knows that a free economy is built on trust. In the years ahead, Chris will vigorously enforce the rules and laws that guarantee honesty and transparency in our markets and corporate boardrooms. He will be an outstanding leader at the SEC," Bush said.
"Should the United States Senate confirm me, I will be deeply honored to serve as chairman of the Securities and Exchange Commission," Cox said. "The rule of law that the SEC enforces has given America the most dynamic and vibrant capital markets in the world ... and those rules have to govern every market participant equally big and small.
"In this amazing world of instant global communications, the free and efficient movement of capital is helping to create the greatest prosperity in human history. The natural enemies of this economic marvel are fraud and unfair dealing," Cox added.
Current SEC Chairman William Donaldson (search) announced Wednesday that he will resign on June 30.
"Bill Donaldson has set high standards for American business and the SEC," Bush said while thanking the outgoing chairman for his work.
Cox, 52, was first elected to the House from the GOP stronghold of Orange County in 1988. He served as chairman of the House Policy Committee from 1994-2005 and is the first chairman of the House Committee on Homeland Security.
Cox supported the Sarbanes-Oxley Act of 2002, Congress' response to financial scandals at Enron Corp., WorldCom Inc. and other large companies. The law ordered the most far-reaching changes in corporate accountability since the Depression, imposing stiff new rules on companies and their top executives.
He also is a longtime advocate of repealing taxes on capital gains as well as on dividends.
The SEC position is subject to Senate confirmation, a process that left Cox bruised once before. He was in line for an appointment to the U.S. Court of Appeals in 2001 when Democrats suddenly gained control of the Senate.
Facing opposition from at least one of his home state's two Democratic senators, Cox realized he faced a difficult fight to win confirmation to the bench without a guarantee of success. He withdrew his name.
But Senate Majority Leader Bill Frist, R-Tenn., said Thursday that he looks forward to supporting Cox's nomination.
"With a career dedicated to public service, Chris Cox has the expertise needed to handle the intricacies of securities regulation. I'm confident that Representative Cox has the vision and leadership to continue restoring our nation's trust in corporate America," Frist said.
Bush picked Donaldson two and a half years ago as SEC chairman to restore confidence in a stock market that had been shaken by corporate scandals.
A Republican and Bush family friend, Donaldson was an activist who often clashed with traditional GOP business allies. They chafed over what they perceived as an excessive regulatory zeal during Donaldson's tenure.
Donaldson, who turns 74 on Thursday, told the president that "the time has come for me to step down and return to the private sector and my family."
In a letter to Bush, Donaldson cited the tireless work of SEC employees and said the past 21/2 years "may well be remembered as the most consequential and productive period in the commission's history."
In turn, Bush wished him well. "Bill Donaldson took on a tough job at a tough time and he delivered for the American people," Bush said in a statement. "He vigorously and fairly enforced our nation's securities laws and helped rebuild the public trust in corporate America that has been important to our economic recovery."
Before he was elected to the House, Cox was a senior associate counsel to President Reagan for two years. He also worked in private practice as a lawyer, specializing in corporate finance. He earned a bachelor's degree from the University of Southern California in 1973, a master's in business administration from Harvard Business School in 1977, and a law degree from Harvard Law School, also in 1977.
The son of a race car driver, Cox is married to Rebecca Gernhardt, whom he met while both worked in the Reagan White House. They have three children.
At a news conference, Donaldson refused to speculate about his successor. Among those who had been considered in the running to replace him were:
—James Doty, a lawyer in the Washington offices of the Texas-based firm of Baker Botts. Doty was general counsel at the SEC from 1990 to 1992.
—Peter Wallison, an SEC expert at the conservative American Enterprise Institute in Washington.
—The commission's Republican members, Paul S. Atkins and Cynthia A. Glassman. Both opposed Donaldson on some important votes.
Donaldson rejected the suggestion that he was leaving because of clashes with Republicans over commission decisions. He had sided with the two Democrats on the five-member panel on rules in such areas as stock market trading, hedge funds and mutual funds.
Donaldson said he hoped "there will be no legalistic rollback of any of these key items." He predicted the next chairman "will leave politics at the door."
Bush turned to Donaldson in 2003 to replace the embattled Harvey Pitt (search), who quit after a series of political missteps.
Donaldson helped put in place the Sarbanes-Oxley Act (search) of 2002. The law tightened oversight of U.S. corporations and came in response to financial scandals at Enron Corp., WorldCom Inc and other large companies.
Donaldson also won approval at the SEC for a number of rules designed to clean up the $7 trillion mutual fund industry.
Various industry groups have increased their criticism of Donaldson in recent months, arguing the SEC was becoming too zealous and unfairly burdening honest companies.
Thomas Donohue, president of the U.S. Chamber of Commerce, spoke in an interview of bringing "the pendulum back ... to have the right balance."
Members of Congress, however, praised the outgoing chairman for his work.
"Bill Donaldson was an outstanding chairman - a moderate who was both pro-business and pro-regulation. It is vitally important for the future of the markets and our economy that his successor has a similar viewpoint," Sen. Charles Schumer, D-N.Y., said in a statement on Wednesday.
Donaldson helped "restore investor confidence in the markets," said GOP Rep. Michael Oxley of Ohio, chairman of the House Financial Services Committee. Donald's tenure was marked by "a commitment to ensuring investor protection and the integrity" of the markets, said Republican Sen. Richard Shelby of Alabama, chairman of the Senate Banking, Housing and Urban Affairs Committee.
Paul Brown, a professor of accounting at New York University's business school, said Donaldson's "array of activities have been impressive and good for investors, but they have not been the traditional conservative Republican-based positions."
Donaldson last month won SEC approval for a plan to overhaul stock trading. He joined with the Democrats on the commission as the two Republican commissioners objected to the new rules.
Under the proposal, known as the "trade-through" rule, stock brokers will be required to accept the best quoted price for any transaction, no matter which market it came from.
The rule is not due to take effect until 2006. Most observers said the SEC probably would take a second look at the issue should Bush appoint a more pro-business chairman of the SEC.
Donaldson's departure and pending vacancies in the two Democratic positions gives the White House the ability to alter the balance of power on the commission. By law, no party can control more than three seats on the five-member panel.
The term of one Democratic commissioner, Roel A. Campos, expires this year. Democrat Harvey Goldschmid has made it known that he intends to return to teaching at Columbia University this fall.
Senate Democrats have suggested that the president nominate the SEC's market director, Annette Nazareth, to fill Goldschmid's slot.
Before joining the SEC, Donaldson had a distinguished 45-year career at the heights of corporate America. He was as head of the New York Stock Exchange, Aetna Inc. and investment banking firm Donaldson, Lufkin and Jenrette, which he co-founded.
FOX News' Wendell Goler and Trish Turner and The Associated Press contributed to this report.