WASHINGTON — The nation has learned much about the rogue’s gallery of crooked corporate chieftans, avaricious auditors, bumbling board barons and feckless federal fraud foes tumbling around in the cascade of business scandals that blacken the image and sap the vitality of American capitalism.
But there is one more category of miscreants that deserves attention: the country’s politicians. Where were they when this was happening? And where are they now that the mess has been exposed, largely by state and local officials and the business cycle? Where is the populist outrage that would have swept this capital even a generation ago?
Make no mistake: The United States of America as a whole has been let down by Enron, WorldCom, Tyco, ImClone, etc., and the conditions that permitted any of them to rob, cheat and defraud at will. This is not just about a few bad apples, or the hits that unwise investors have taken in a bubble they should have avoided, or partisan wrangling in Congress. This is about the system — the ethical and legal sinews of a nation that celebrated its 226th birthday on July 4.
In the self-enrichment Zeitgeist of the 1990s, when markets were declared the sole arbiter of economic conditions around the world, it was easy to lose sight of the vital role that stock and bond markets — and the houses of finance built on them — have traditionally played for the nation. They have financed America’s future.
They channeled the citizenry’s accumulated savings into national infrastructure, new products and new jobs. They were not slush funds that enabled brigands to buy off the lawyers, auditors and, yes, the nation’s politicians who were supposed to be the public’s guardrails.
This wave of scandals grew to its tsunami-like proportion after the professionals working for and with these companies became secret entrepreneurs. They sacrificed the independent judgment they claimed to exercise and joined in the game of stoking short-term stock price increases, regardless of long-term consequences.
When a company president signs a secret agreement with his firm’s chief lawyer linking the lawyer’s compensation to the president’s salary — as investigators believe Tyco’s Dennis Kozlowski did on Aug. 19, 1998, with his general counsel, Mark Belnick — the lawyer becomes an entrepreneurial agent of his boss.
The lawyers, directors and auditors of Enron fell into the same trap of this hidden entrepreneurism. So did auditing firms that sold tax-avoidance schemes on a contingency-fee basis. This would give them a cut of the amount they kept out of the national Treasury rather than a fee for professional services. Ditto managers who have relocated their companies into Bermuda to avoid taxes and to reap windfall profits for themselves through reincorporation there.
In the wake of Sept. 11 and President Bush’s declaration of war on global terrorism, the unfashionable subject of the patriotic obligations of American corporations in the global era is suddenly speakable again in official Washington.
Tax havens — once in favor with the Bush administration because they put pressure on Congress to cut corporate taxes here — are now the target of congressional restrictions. Modest reforms of accounting practices long sought by Sen. Paul Sarbanes now appear likely to pass a Congress that over the past decade actually made it harder for investors to protect themselves from these shenanigans.
But the administration is inclined to treat the tsunami as so much surf. Lock up the few bad apples and trust the market to correct itself is the message that President Bush has been giving out, and will probably repeat in a July 9 speech he has scheduled to reassure the nation.
Over the long run Bush is right about the self-corrective nature of markets. Honesty and transparency become valuable commodities in a climate of chicanery. Someone will figure out how to market them, get rich and inspire imitators.
But getting there is a more serious problem than Bush and Congress seem to appreciate. The markets that finance America’s future are shaken not just by Enron Etc. but also by the uncertainty of the struggle that Bush, John Ashcroft and others paint in such vivid colors weekly.
The warnings of nerve gas attacks and dirty bombers conflate in the public mind with the latest bulletin of Crooks Inc. fleecing more employees and stockholders. That’s enough to kill any interest in investing in much more than gas masks.
Markets, like men, are fallible and need help and supervision. Americans right now need a sense that someone is paying attention and putting their protection ahead of ideology or the lust for campaign funds. That is the assurance they will be looking for on July 9, and beyond.
Jim Hoagland can be reached at The Washington Post Writers Group, 1150 15th St. NW, Washington, DC 20071-9200 or hoaglandj@washpost.com.
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