Monday, January 21
Blackburn: Enron a Texas chainsaw massacre
By Tom Blackburn, Palm Beach Post Staff Writer
Monday, January 21, 2002
Some media ringmasters already deem Enron a political scandal. They know how to cover scandals, and they think public policy bores the audience.
But the Enron story isn't about scandal. It's about public policy, and public policy isn't boring when it affects everybody's retirement income and electric bills.
Can President Bush the Younger still push privatizing Social Security accounts after Gov. Bush the Youngest had to fire the managers of Florida's pension fund for losing $300 million on 7.5 million Enron shares? Those managers, Alliance Capital Management Corp., are among the private-sector paragons from whose ranks the government would tap some firms to handle individual accounts in proposed Social Security reforms.
Ah, but you say Enron is a special case? Not so special. Last year, 255 companies went the way of Enron, although they didn't get there the way Enron did, and they weren't all vaporous dot-coms you never heard of. Some were as plain as underwear. Fruit of the Loom, anyone?
Last week, Sunbeam was back in the news with "Chainsaw Al" Dunlap agreeing to give back to shareholders $15 million, part of his take while Sunbeam was "misstating," as they say, earnings. Sunbeam went under four years ago, and the shareholders who took the bath aren't dry yet.
They never will be. In the fullness of time, they may get a little something for Mr. Dunlap's errors. But they won't get back what they lost, and, if they need it now, they won't get it in time.
Mr. Dunlap does not acknowledge that he did anything wrong.
Misstatement of earnings has been nearly epidemic, but it's nothing new. Business is based in theory on the ideal of the marketplace -- willing seller, willing buyer -- but operates more like a shell game.
Mr. Bush the Younger was tardy himself in 1990 with some reports -- technical violations -- before he sold his shares in Harken Energy Corp. for $4 apiece. A few months later, the shares were worth $1. There always are those who know when to sell and when to hold, and those who don't. The latter are called willing buyers, and ain't it cause for celebration when the little guy gets into the market and does well?
Individual Social Security accounts could give more little guys the chance to do well. Or not.
The other question the Enron story raises is whether electricity deregulation is the good idea supporters once touted it to be. Enron was the chief salesman, and the company's supposed success was the biggest selling point in the national rush toward taking a natural monopoly, power, and turning it into a competitive business, like Sunbeam's.
In an absolutely fascinating essay for The Washington Post last week, Energy Secretary Spencer Abraham listed some of the results of that rush: the nation's largest bankruptcy, Enron; the largest bankruptcy by an electricity distribution company, Pacific Gas & Electric; the largest independent power producer, Calpine, still solvent but down $2 billion in market capitalization in a month; the largest state, California, hip-deep in debt after sitting through rolling blackouts.
The lesson Mr. Abraham takes out of all of this is not "stop deregulating." It's "deregulate faster."
When you've fallen out a window, you should try to hold on if you hit a ledge. Don't roll off.
Or, as Lawton Chiles used to say, "If you keep doing what you've been doing, you'll keep getting what you got."
There are business scandals galore with Enron, but political scandal, if any, lies in the quids and quos of campaign contributions. The public seems to accept them. What else is new?
The policy problems, on the other hand, are new. Mr. Bush the Younger based big parts of his domestic program on the unstated but essential proposition that Enron was healthy, wealthy and wise. Maybe a few insiders got wealthy, but one out of three isn't good enough if that's the way you want to run the country.
Tom Blackburn is an editorial writer for The Palm Beach Post. His e-mail address is tom_blackburn@pbpost.com
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