President Bush gave his much-anticipated Wall Street address with his proposed reforms for the recent business fraud issues. He spoke primarily of investor confidence, which as I noted below is the main thing he is interested in here. He wants to "encourage stock ownership" by average citizens. He called for several reforms for accounting practices, more independent boards of directors, less salesmanship from stockbrokers, and longer jail terms for those caught. He announced a new executive task force for corporate fraud. He even called for the SEC to have increased powers to stop executives from grabbing failing companies' cash for themselves with big bonuses (he gave surprising emphasis to stopping this practice), and for those who gain extra pay through cooking the books to have that money taken from them. He said CEOs should be held personally liable for the honesty of their companies' accounts. He called for penalties which, if they had been rigorously applied in the past, would have had him just now getting out of jail himself (though of course this was not mentioned).
He mentioned the words "fraud" and "corruption", but not "bribery". He made no mention of the question of influence buying. He implied that all the chicanery was an outcome of the Clinton-era boom economy, as if too much prosperity were actually harmful -- no mention was made of Republican deregulation measures and removal of previous restraints on acceptable corporate actions. And most especially, no mention at all was made of the issue of tax evasion. One thing we've had revealed is that many of these corporations have avoided their taxes not through legal loopholes, but through a combination of phony offshore incorporation and outright money laundering -- the latter often accomplished by the big accounting firms. Bush continues to defend the use of offshore incorporation to avoid paying any taxes, and though he called for an end to accountants' conflicts of interest, he didn't call for any control on the practice of accountants selling tips for concealing income from the IRS, or for even slightly more vigorous enforcement by that agency.
So is investor confidence restored yet? Nope, the Dow is still dropping, and the voices of Wall Street are mainly calling Bush's proposals weak, toothless, and too little too late.
Many of Bush's proposals involved strengthening the Securities and Exchange Commission, but the head of the SEC, Harvey Pitt, is under increasing attack. He has too many embarrassing friends at places now under investigation, and made too much money in the business of defending companies against the SEC. And despite his promise that he'd investigate the Vice President just as rigorously as anyone else, many in Congress, including some Republicans (notably John McCain, who sadly has decided not to run for reelection in 2004) are calling for his removal.
Check this out: the previous head of the SEC, Arthur Levitt, called for accounting firms to stop the practice of selling profitable services to the same companies they were auditing. Those firms have now meekly accepted this reform measure, considered the first and most obvious post-Enron reform that needed to be made, but back them this made them fighting mad. Guess who led their counterattack against Levitt? None other than Harvey Pitt. Bush gave him the job, he promised a "kinder and gentler" SEC, and the Enron collapse promptly followed, to Pitt's great embarrassment.
The latest companies caught with their pants down include Reliant Energy (a hefty $7,800,000,000 of fake revenue from round-trip energy trading) and Merck ($12,400,000,000 -- a new record). It turns out that Raymond Gilmartin, the CEO of Merck, is a major political contributor to George W. Bush, and like Ken Lay of Enron, had plenty of "access". Bush obligingly appointed him to an advisory panel to design his administration's perscription drug policy. Merck then spent tens of millions on advertising and "astroturf" (that is, phony grassroots) pressure groups to baffle the Democratic perscription drug initiative. Once again, just as with energy policy, George W. Bush turned over his policy on a key national issue of the time to a corporate crook eager to profit from that policy, in exchange for money.
Xerox's fraudulency numbers have gone up from $3,000,000,000 to $6,000,000,000. MCI WorldCom's executives are taking the fifth before the House Financial Services Committee. WorldCom is being sued by the SEC, and guess who the court has appointed as "monitor" of that case: Richard Breeden, who was the SEC head during the first Bush administration, and who bears responsibility for dropping the investigation of George W. Bush at Harken energy after a "peculiarly perfunctory" investigation (as economist and columnist Paul Krugman puts it).
Tom Daschle is trying to get the SEC to cough up all its records on its investigation of George W. Bush at Harken Energy. Some of its memos have been leaked.
Judicial Watch, which was considered a conservative organization, is now suing Dick Cheney for stock fraud when he was CEO of Halliburton. They seem to be far from the only group on the right that is now turning on the Bush administration as furiously as anyone on the left. The true conservative movement has always rather despised the Bush family, though not enough to vote against them if the other choice was a Democrat.
The Senate investigation of Enron has released its report. It holds the Board of Directors responsible for the mess, including Wendy Gramm, who was on the auditing committee. Wendy Gramm had previously been a federal regulator under the first President Bush, and in that position managed to grant Enron a lucrative regulatory exemption. She got her seat on their board within months after that. Wendy's husband (and Enron's former pet senator) Phil Gramm is now leading the fight to dilute or block meaningful reforms, according to Time. As a lame duck, he can afford to sacrifice his reputation to the greater cause of protecting crookedness. The front-runner to replace him in the senate, by the way, is a democrat who, if he wins, would be the first African-American to win statewide office in Texas.
In the miscellaneous column, check this New York Times piece about the lobbying law loophole that lets special interests conceal their identities while influencing legislation. (You may have to register at the site to read it. You don't have to pay anything.) And it's been reported that the ad agency Ogilvy & Mather just got a renewed contract to make lots of anti-drug ads despite having been caught overcharging the government in previous dealings. And though it's not really on topic here, I'll briefly mention that George W. Bush's nominee for the post of Surgeon General, Dr. Richard Carmona, is being called unfit for the office by some who know him.
In a sign of how narrow business special interests can be, some business lobbying groups, and seaport officials, are now urging the government not to try too hard to stop terrorists, if as a side effect it impedes their profits.
Some of the bolder investment houses feel that the current nadir of public confidence is the perfect time to start buying stock again. Bargains! They might be right.
Lastly, I think I'll mention my dream for a public policy
lobbying type group in Washington. Washington is full of liberal
groups and conservative groups, and even fuller of private special interest
groups. I want to see an organization that brings grassroots liberals
and conservatives together for a common agenda that both can agree on completely:
reducing corruption. I'd like to see a group that monitors every
Washington official and reports on the corruption level of each, giving
each a grade for crookedness without regard to party affiliation or philosophical
position, with equal numbers of liberals and conservatives doing the reporting
and investigating. Such a group might be a terrific starting point
for reducing the bile and hatred that has been wedged between the left
and the right in America over the last two decades... and if effective,
it would spell doom for any future Bushes.
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