- Publicus is the pen name of a longtime observer of and
participant in American politics.
- Then As Now
- The more things change, the more they stay the same.
Back in 1912, when he was running for president, Woodrow Wilson had this
to say about democracy in America:
- "Suppose you go to Washington and try to get at
your government. You will always find that while you are politely listened
to, the men really consulted are the big men who have the biggest stakes
-- the big bankers, the big manufacturers, the big masters of commerce....
Every time it has come to a critical question, these gentlemen have been
yielded to, and their demands treated as the demands that should be followed
as a matter of course. The government of the United States is a foster
child of the special interests."
- What else can be said about the Enron meltdown? Nothing
happened here that didn't happen during the savings and loan scandal of
the 1980s, except back then we didn't have 24-hour cable channels and the
Internet giving us saturation coverage.
- Then, as now, the looting was set off by deregulation.
In the S case, Congress allowed the small-town lenders to troll for depositors
anywhere, with controls lifted on the interest rates they could offer,
while promising to insure deposits up to $100,000. In Enron's case, it
was a Congressional attack on the regulated economy of electric utilities,
coupled with its non-regulation of the new and exotic world of derivatives,
and its deliberate efforts to give accountants a free hand in sanctioning
all this new funny business.
- Then, as now, the path to untold riches for a craven,
favored few was paved with millions in well-placed campaign contributions
to members of both parties who called the regulatory cops off the beat.
In the most famous S case, Charles Keating distributed $1.3 million to
Senators Cranston, DeConcini, Glenn, McCain and Riegle, to get them to
harass federal regulators who were sniffing around Keating's Lincoln Savings
& Loan -- the delay ultimately cost taxpayers $2.5 billion. Keating's
foray was bold, but the purchase of access and influence by Enron and Arthur
Andersen makes it look amateurish.
- Then, as now, supposedly trustworthy guardians of the
public in the accounting, banking and legal professions facilitated the
bookkeeping lies. (Let us never forget how Alan Greenspan, in 1980 a private
consultant, wrote letters to federal regulators and testified on behalf
of Lincoln S's solvency, for which he was paid $40,000 by Keating.)
- Then, as now, the victims were the pensioners and retirees
whose savings were redistributed upwards, as well as the common workers
whose jobs were destroyed not by market forces but by fraud and theft.
- Will there be a meaningful response from government?
Probably not, unless it turns out that a great many more people were affected
directly, or if we discover more Enrons in the coming months, or if a couple
of mega-banks who went to bat for Enron, like Citigroup and J.P. Morgan,
start to topple. Otherwise, this scandal will be swept under the rug in
much the same way that the S mess was. In 1988, neither of the major party
candidates for president would say anything about the S scandal -- too
many members of their own party were tainted, as were too many of their
party's donors. In the same way, neither George W. Bush nor Al Gore breathed
a word about the enormous deregulation of the banking, finance and insurance
sectors that was effected by the 1999 repeal of the Glass-Steagal Act.
That Depression-era law had forced commercial banks out of the hyper-risky
business of stock speculation and set up the Federal Deposit Insurance
Corporation (FDIC) to protect individual depositors from bank failures.
Now thThe only Democrat in the Senate with enough independence to speak
the truth about the Enron meltdown is Russ Feingold, and so far he seems
more interested in getting his watered-down campaign finance bill through
the House and to the President's desk.
- And regarding campaign reform, I'm with Martin Mayer,
the veteran financial writer whose book, The Greatest-Ever Bank Robbery,
has an honored place on my bookshelf as an invaluable guide to the savings
and loan mess. In it, he writes, "Political analysts have already
seen the S crisis as an illustration of the corruption that must ultimately
infect any government where the costs of running for office are greater
than those that can or will be borne by the relatively small community
of the public-spirited."
- Just remove the words "S crisis" and insert
"Enron" or "Arthur Andersen," the president's energy
bill or his "economic stimulus" corporate welfare package, his
top-heavy tax cuts, or the Democrats' cautious, calculating responses to
all. What you'll have is a pretty good description of where we're at.
- God Bless Sherron Watkins
- "Has Enron become a risky place to work? For those
of us who didn't get rich over the last few years, can we afford to stay?"
With those words, Enron Vice President Sherron Watkins began her memorable
unsigned letter to company chairman Ken Lay, expressing her alarm days
after the company's CEO unexpectedly resigned.
- Too bad there was no Sherron Watkins working at Harken
Energy Corp. in the late 1980s and early 1990s, when George W. Bush was
just the president's son and a director of that struggling oil firm. Four
times during that period, Bush sold hundreds of thousands of shares of
Harken stock and failed to make timely disclosure of those transactions
to the Security and Exchange Commission, in violation of federal law.
- The full story has been unearthed by Knut Royce and the
Center for Public Integrity [<http://www.public-i.org/story_01_100400.htmclick
here to see the story], but the key point is this: Just like his longtime
patron Ken Lay, Bush took advantage of inside knowledge of his company's
shaky finances to sell his stock before public filings of that information
drove its price down, harming innocent investors. On June 22, 1990, he
sold $848,560 worth at $4 a share, "just weeks before the company
filed a quarterly report revealing that it had hemorrhaged $23 million
during that period," Royce writes. By the end of the year, Harken
was barely above $1 a share. Harken had been ailing for at least a year,
but masked its losses "by claiming in its annual report a capital
gain on the sale of a subsidiary even though the transaction was through
a seller-financed loan," he adds. Does this sound familiar?
- If the Democrats were really going to go for the jugular,
which they're not, they'd be looking for ways to attack the whole culture
of greed exposed by Enron's implosion, and they'd be all over Bush for
this transgression, as well as all his family ties to power and plunder.
- Instead, the Dems are trapped by their own complicity
in the decisions that made this scandal possible, by their own feeding
at the trough of corporate campaign contributions, and by the conventions
of Washington scandals. That is, we are now expected to treat the President
and his men as if they are innocent of any misbehavior unless we can find
an explicit quid pro quo. The little crimes that turned George W. into
a multi-millionaire are history. Again, unless someone discovers a whole
new vein of Enron-Bush corruption or a major bank fails or some other corporate
marauder collapses, this scandal will be contained and defused.
- Still, you have to give Sharron Watkins credit, not just
for her gutsy letter to Lay, but for capturing in one sentence the metaphor
for our times: For those of us Americans who didn't get rich over the last
few years, can we afford to stay?
- Tommy, Teddy and Tepid Opposition
- Senator Edward Kennedy gave an important speech on January
16, calling on Congress to undo about $280 billion of the $1.35 trillion
tax cut it enacted last year. (Wouldn't it help us fathom those numbers
better if they were written out as $280,000,000,000 and $1,350,000,000,000?)
Pointing to pressing needs in education, health care, and the like, Kennedy
urged his colleagues to repeal future reductions in the top rates affecting
just the top 20 percent of all taxpayers -- people making over $72,000
a year -- and primarily those in the top one percent, who make over $373,000.
He also called for reinstating the estate tax, but raising the exemption
to $4 million for couples, effectively protecting all but 0.3 percent of
all estates from the so-called "death tax."
- When you recall that back during the election, top Democrats
like Senator Tom Daschle argued that a $750,000,000,000 ($750 billion)
tax cut would be excessive, you would think that Teddy's modest proposal
would be winning a lot of support from his colleagues. But so far, there's
been a resounding silence. Not even the labor unions had anything to say,
though they have the greatest reason to join Kennedy's call -- it's their
members and millions of moderate and middle-class income Americans like
them who are being forced to shoulder an ever-larger share of the tax burden
and corresponding cuts in social spending. For example, two days after
Kennedy's speech, AFL-CIO President John Sweeney spoke at Jesse Jackson's
Rainbow/PUSH Annual Wall Street Project Conference in New York City, and
he totally dodged the issue. And so the media debate has been dominated
by demagogic charges, from the President and all his men, that Kennedy
and his fellow Democrats want to raise taxes on all Americans in the midst
of Senator Daschle gave a big speech, a few days before Kennedy's, calling
for a "New Growth Agenda for the American Economy." If anyone
needed proof that eight years of Clintonism have rotted the party's soul
to dust, here it is. Democrats are now the "fiscal conservatives,"
supposedly more devoted to paying down the national debt than the budget-busting
Republicans. This ideological switcharoo is not a bad thing, but only if
the Dems were willing to talk about reversing the single-biggest policy
change contributing to the re-appearance of annual deficits: Bush's $1.35
trillion tax cut for the wealthy. Senator Daschle correctly fingered that
tax cut as the root cause of our new budget problems, but he only positioned
the Democrats as proposing "more responsible" tax cuts for the
future. That's pretty tepid opposition.
- "If we can root out a network of terrorists hiding
in caves half a world away, we can solve the problems in our own economy,"
Daschle says. Leaving aside whether we're going to be as successful as
he claims in the former, why doesn't he talk about the real problems in
our economy? Like the emergence of two Americas -- one that benefits from
owning real property and assets and one that owns nothing but its debts;
one that has seen its income and wealth rise phenomenally over the last
25 years and one that has stayed stagnant or lost ground. I didn't hear
anything in his speech about an increase in the minimum wage, which, adjust
for inflation, is at least 20 percent lower than the level it stood at
in 1979 (no, that's not a typo). Nor is there any discussion of the health-care
crisis or the huge need for affordable day care.
- So Senator Daschle's attempt to reframe the current debate
fails to change the horizontal or vertical edges of that frame. We're not
going to talk about how we find the money we need to spend on programs
that benefit the common good (i.e. tax policy). We're not going to talk
about big changes in where we spend that money. We will dress up our few
remaining differences -- over things like Social Security and Medicare,
issues worthy of a fight. But we won't do anything to really provoke a
national soul-searching, or to attract the interests of the millions of
non-voters and independents (who, by the way, are mostly ex-Democrats and
people who would have been Democrats, based on their demographic characteristics).
If this is the best that Daschle can do, it's still not enough.
- Here Comes 2004
- It's Big Speech time for lots of Democrats, it seems.
Senator John Kerry of Massachusetts just delivered a major environmental
address. Representative Richard Gephardt followed quickly on his heels
(and dodged the Kennedy tax proposal, too). Why the rush of Major Addresses
from all these presidential wannabes (Daschle included)? Isn't it a bit
early to be jostling for position? After all, the Iowa caucuses are still
two years away.
- Well, all these ambitious politicians know that the "wealth
primary" has already started -- that's the race for big hard-money
donations that precedes the actual primary. History shows that every candidate
since 1980 who has raised the most money in the year before a presidential
election has gone on to win his party's nomination. In effect, the wealth
primary is the race in which wealthy donors get to pick the candidates
the rest of us will get to vote on later.
- The Democratic National Committee also just decided to
make money an even more certain arbiter of its candidates' chances by choosing
to allow any state to hold its primary as early as February 3, 2004. Iowa
will still go first, on January 19, followed by New Hampshire on January
27. But after that, big states like California and New York would be free
to push their dates forward, and there are already signs that South Carolina,
Michigan and Arizona will do so.
- There are no countervailing pressures to cause states
to delay their primaries, and later dates are presumed to have less influence
on the process. So assuming this all comes to pass, the takeover of the
Democratic presidential primary process by big money will be complete,
since the only way anyone will be able to compete under these circumstances
will be with huge television advertising purchases. It's fitting that the
man presiding over this maneuver is DNC Chairman Terry McAuliffe, Numero
Uno Friend of Bill, fundraiser extraordinaire, and the person who suggested
that the Clinton campaign of 1996 systematically rent out the Lincoln Bedroom.