The CEO of Dynegy has stepped down, their company having been caught at using Enronesque scams during the electricity crisis. CMS is another energy company that's had a CEO resign lately. Citigroup, a bank involved with Dynegy's money games, just got subpoenaed by the SEC regarding their role in Dynegy's "Project Alpha". Citigroup gave Dynegy $300,000,000 as part of this complicated deal... and Dynegy then counted that money as part of their income from energy production, instead of as a loan or investment.
Congress has been working on a bill to reform the accounting industry, so they can be more or less trusted again. Even those who have protected the finanical industry now say such reform is needed, so that investors can trust the American capital market enough to keep putting their money into it. Such reform also needs to cover institutions like Merrill Lynch, which recently got caught with smoking-gun memos showing that they glowingly recommended to their customers various stocks which they privately felt to be crap. What has been uncovered, basically, is an industry-wide tacit conspiracy to pump up a global stock bubble by means of everyone lying to everyone else about how solid and profitable various stocks were. Past a certain point, it may be that you sort of had to participate in the lying just to compete. Some say that the bubble is still not deflated -- that even after recession, the market still has to go down by a third or more to be right-sized.
But the financial industry lobbyists have been working hard to kill this reform bill, or make it toothless, and their main fighting hero on the hill has been Phil Gramm of Texas -- the senator whose wife was on the Enron board of directors. He is on the senate banking committee and takes massive campaign contributions from the banking industry lobby. (Some politicians, it is worth noting, refuse contributions from those whom they are directly responsible for regulating. If we're going to further reform campaign finance, doing something about contributions like this which create direct conflicts of interest would be a good place to start.) Gramm has the backing of President Bush and many other Republicans.
The bill includes some reforms suggested by Paul Volcker, the former Federal Reserve chairman, who was picked to head a team looking into reforms for Andersen, and the accounting industry in general. The bill was drafted by Paul Sarbanes (D-MD), the chairman of the banking committee.
One area that they are trying to reform is the practice of incorporating offshore -- of putting your corporation's legal place of business in Bermuda or the Caymans -- in order to avoid taxes. The Clinton administration moved several years ago to rein in this form of blatant cheating, but they were blocked. If they had succeeded, the Enron story might never have happened. Now prominent Repulicans are again fighting to protect what amounts to nothing but a legal fig leaf for a special privilege to be exempt from taxes -- a privilege inaccessible to most Americans. These scams cost normal taxpayers a huge amount of money.
Republican "reform" of bankruptcy law is moving forward. The bill is worse than I thought. It takes away a lot of the middle class protections we've been accustomed to... yet preserves protections for the assets of the upper class. Jeez. Did the whole GOP just think we wouldn't notice if they went totally blatant and above-board with legislating in the interests of pure privilege? Maybe they did. Maybe they thought a war against terrorism would cover this all up nicely.
Or maybe, as some have suggested... they knew perfectly well that George W. Bush would lose his mandate and his ability to get any legislation passed in 2002, and would never be back after 2004, and so they just rushed to pass as much special-privilege legislation as they could in Dubya's first two years, no matter how bad it looked, because they would not get another chance. The future is looking dark for the GOP in general, largely because so many state and local branches have been taken over by the Christian far right, who are too uncompromising to win over the center of the electorate. People in certain circles are even starting to discuss the faint possibility of the death of the GOP as a viable party -- something inconceivable a few years ago. So, the theory goes, they're acting like the outgoing management team of a corporation entering chapter 11: dispensing the last of the cash to themselves as bonuses.
Remember when the Republicans were supposed to be the party of fiscal responsibility and sound free-market economics? Now it's the Democrats who try to balance the federal budget, and maintain a market system that rewards productive effort over the long term.
Joe Lieberman and his committee are hitting the White House with subpoenas for more material about their relations with Enron. The White House is telling him to calm down, they're cooperating as best they can. I see grandstanding on both sides.
Another energy company that has now been caught using Andersen's patented special accounting magic to inflate their apparent profitability, and hence the stock price, is the oil company Halliburton. They started using the flimflammery after Dick Cheney took over as CEO.
Microsoft also got in a spot of trouble for stock-inflating
accounting. They just reached an out-of-court settlement with the
SEC. Microsoft, of course, loves out-of-court settlements.
They've agreed to so many of them. And, in many cases, promptly found
ways to keep doing whatever they agreed to cease and desist from.
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