State Of The Union - Corrupt
By Publicus

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 [< 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.

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