When the fox guards the henhouse
There’ some stiff competition in the Stupidest Thing Said Yet department about the swoon in the financial markets. But among the heavy contenders we must surely count those who are now saying they know who’s responsible, and it is us.
According to this theory, you, me and Joe Doaks made Ken Lay do it. Came as a surprise to me, too. Naturally, as a liberal, I just love guilt, so I was ready to sign right up for this one, but try as I may, I can’t get it to make a lick of sense. Nevertheless, several of our heavy ponderers and The Wall Street Journal’s editorial page insist that we did it.
It seems “we,” a word they use rather promiscuously in my opinion, were seized by greed and folly in the ’90s. “We” were so stupid we thought stock markets only went up, and “we” are whining like children only because “we” don’t understand that in the big, tough, he-man world of capitalism, we must take risks.
Who you callin’ “we,” white man?
Let me count the ways this one is a crock. It’s not as though the 1990s are exactly lost in the mists of time here. Children under 10 can recall large portions of the decade. And as I remember it, you me and Joe Bob Doaks were sittin’ out here, enjoyin’ the Clinton economy, which produced zillions of new jobs, except that unless you had a college degree (and 69 percent of Americans don’t have one) you had to work about three of them just to make ends meet.
Sure people were gettin’ rich. It just wasn’t us. Go back and look at the numbers — astonishing increase in wealth, almost all of it going to the top, the richest rich people got all of it. Only at the very height of the Clinton boom did the working class finally budge back to where it was in the late 1970s.
You can get all the numbers from Kevin Phillips’ new book, “Wealth and Democracy: How Great Fortunes and Government Created America’s Aristocracy.” And I can name for you the honor roll of people who regularly raised hell about this very thing in the ’90s — we were not “oblivious” — and we raised hell about exactly the structural, regulatory flaws that have now proved to be so disastrous.
“We” are not in the greedhead class. “We” are not the CEOs who increased their pay from 85 times what the average worker made in 1990 to 531 times what the average worker made in 2000. Over half of us still have no stake at all in the stock market, so be careful with your “everybody.” And many of “us” who do have a stake in the stock market are not day-traders or people who know dog about NASDAQ or any damn thing about the New Economy — which someone, not “us,” kept claiming was a perpetual motion machine. “We” wound up in the stock market only because “we” were encouraged to put our savings into these 401Ks, and that’s all “we” know about any of it.
Take your “we” and shove it.
Now that I have concluded that satisfying rant, let’s try our daily dose of practical suggestions on how to fix this mess. The Senate voted 97-to-zip for the Sarbanes bill, which is a good beginning. But the House Republicans, led by Rep. Michael Oxley, will do their best to neuter it. And according to the published reports, Capitol Hill is crawling with business lobbyists trying to wreck the bill.
The major immediate unplugged hole is expensing stock options. But there are some larger ones, as well. The entire derivatives market is sorely in need of regulation — its excesses should have been curbed at least after the Long Term Management fiasco. Robert Bryce, author of “Pipedreams,” a book on Enron to be released in October, calls derivatives “the finance world’s equivalent of anabolic steroids.” And just as fatal in the end, too.
A few days after the 1992 election, Enron and several other companies began petitioning the Commodities Futures Trading Commission for an exemption from regulatory oversight on energy derivatives contracts. A few weeks later, lame-duck chairman Wendy Gramm and one other commissioner (the commission was short two of its five members) exempted the energy companies from CFTC’s authority. And Bryce reports in his book that the companies were exempted even if the contracts they sold were designed to defraud or mislead buyers! The then-chairman of the subcommittee with jurisdiction over the CFTC, Rep. Glen English, said, “In 18 years in Congress, this is the most irresponsible decision I have come across.” Give that man the Cassandra Award.
That’s nuts and needs to be fixed. But it is also an indication of how deeply political this scandal is. All the pols pointing fingers at the CEO-nistas should turn those fingers right around at themselves. Twenty-two years of pretty much uninterrupted administrations putting foxes in charge of various governmental henhouses, and this is what you get. Worse, Congress itself is so deeply corrupted by campaign contributions (legalized bribery) it has constantly acted against the public interest, in favor of the corporate interests.