I usually don't talk to much about politics with people. I don't like too, because I usually don't agree with most people and only end up aggravating them. I don't consider myself either a Democrat or a Republican and vote for candidates from both parties from time to time. In the last Presidential election I voted for an independent. Since most people are partisan one way or the other my thoughts just don't fit most people's political boxes. And people hate to hear the person they voted for criticized. They think everyone in politics is corrupt except the guys they like. However, today was a market dominated by politics and needs to be addressed.
I new that President Bush was going to give a speech today on corporate corruption. I thought it was going to be a White House address scheduled for prime time. I thought the subject was serious enough to warrant that. I was a little surprised this morning when I turned on the TV and found out that he was going to give his address to Wall Street itself at 11:30 AM. As Presidential theater - and a lot about being the President is theater - that alone was a disappointment and signaled to me that Bush's speech wasn't going to be confrontational. If Bush gave the speech from the White House it would have given it a more serious tone. You would have the impression that he would be able to use some of his resources to thwart corruption and his presence in the White House would set him apart from the Wall Street cooks.. Moving to Wall Street was an act of conciliation. And you can't be friendly and conciliatory with crooks.
He opened up his speech by praising Wall Street and the corporate CEO's for creating an innovative economy and then spent a minute claiming that the economy was in recovery. Only after half way through it did he address the issue at hand and call for "new era of integrity in corporate America." "With strict enforcement and higher ethical standards, we must usher in a new era of integrity in corporate America," he said. "The business pages of American newspapers should not read like a scandal sheet," he went on.
Bush then proposed a $10 million dollar immediate increase in the SEC and a proposed $100 million dollar increase to its budget next year. He also called for higher jail sentences for corporate crooks and called for more self policing. According to Reuters:
"While Bush's call for stronger prison terms would require legislative action, many of his proposals on Tuesday relied on self-policing by companies and by the U.S. stock exchanges.""Bush appeared to be seeking a balance between reassuring investors with government action while avoiding a major overhaul of securities laws that companies would resist and, White House officials said, could spook the markets."
"With public outrage building over multimillion-dollar pay packages for some top executives, Bush called for companies to explain how their executive compensation packages are in the company's interest and by explaining "every detail" of them in plain English in their annual reports.""He urged companies to stop giving loans to executives."
"The president also called on stock exchanges to require that a majority of the directors of public companies be "truly independent."
Nothing will happen if companies do not do what Bush asked them to do. The speech had no real bite to it.
Bush failed to fire the SEC Commissioner who has been under fire by people within his own party. Even the Wall Street Journal this morning said that Bush should fire the commissioner in a front page article.
Bush also failed to create an independent committee to oversee auditors.
The speech was a big nothing and that is why the stock market dropped right after he gave it today.
But maybe it is too late for the President to do anything. One New York Times editorial today had this to say:
"Mr. Bush keeps saying all the right things. He is "deeply concerned." He will "hold people accountable." But words, like stocks, lose value when nothing backs them up. It is now more than six months since the president promised "a lot of government inquiry into Enron." Since then, Playboy has done a better job of exposing the women of Enron than the Bush administration has done at exposing its men. Just as the Justice Department rounded up some 1,000 alleged Sept. 11 suspects and failed to indict a single one of them for terrorist activity, so it has made a big show of its shaky Andersen conviction while failing to indict a single Enron executive or individual Andersen accountant. (Not that all the law-enforcement news is downbeat: last month John Ashcroft's minions held a press conference to boast that a 13-month investigation had led to the arrest of 12 prostitutes in New Orleans.)"
"The sight of a corporate crook being led away in handcuffs, Giuliani-style, would do far more to restore confidence in Wall Street than any more presidential blather. Mr. Bush says that only "a few bad actors" are at fault. Why is the administration so lax about bringing them to justice?"
"That may have something to do with who those "few bad actors" are. Speaking on ABC's "This Week," Richard Grasso, chairman of the New York Stock Exchange, tossed out a range of 1 to 15 as the rough count of corporate culprits, "in comparison to more than 10,000 publicly traded corporations." The fact remains that so far at least five members of that theoretically tiny club have direct ties to the Bush administration: Enron, Halliburton, Andersen, KMPG and Merrill Lynch — the last three all former clients of the president's choice as Wall Street's top cop, the S.E.C. chairman Harvey Pitt. Five for 15: Mr. Bush could have used a batting average that high when he ran the Texas Rangers."
"Despite this record, there has been only balking, not housecleaning, at the White House. Thomas White, who was vice chairman of Enron Energy Services when it allegedly hid $500 million in losses and manipulated the California energy crisis, is still secretary of the Army, despite having been cited by the Senate Armed Services Committee for violating his signed ethics agreement. (Even worse, Mr. White has threatened to bring to the Army his "understanding of best business practices.") The record of Enron contacts by him and countless other administration officials remains incomplete and in constant revision. What information does dribble out often emanates from the White House counsel, Alberto Gonzales, who himself had an attorney-client relationship with Enron while a partner at Vinson & Elkins in Houston."
"WorldCom is a political boon to the president because it allows him to moralize about epic-scale crime without mentioning Enron, Halliburton or Harken. But the Enron bomb hasn't been defused. Its next detonation may come the day someone outside the administration unearths the as-yet mostly secret names of those buddies of Enron executives who were let into the hundreds of side partnerships that overnight yielded multimillion-dollar plunder on nominal stakes (with ordinary stockholders left paying the bill). "Not in memory has a single major company grown so big in tandem with a presidential dynasty and a corrupted political system," wrote the Republican political analyst Kevin Phillips in The Los Angeles Times five months ago, tracing Bush family favor-swapping with Enron back to 1988 and likening Enron's potential damage to that of the Harding administration's Teapot Dome scandals. "The question now is whether what went up together will come down together."
"No flowery speeches are required to describe the reforms needed now, from fully independent policing of accounting firms to the complete prohibition of conflicts of interest that encourage both accountants and stockbrokers to cut corners. "No off-balance-sheet or offshore entities, no shell corporations, no sham transactions," adds Robert Morgenthau, the Manhattan district attorney, who is pursuing Enron more aggressively than the administration is. Arthur Levitt, the former S.E.C. chairman, urges legislation that increases the legal liability for investment bankers, lawyers and accountants who aid, abet and also profit from corporate Ponzi schemes."
"The president could get real reform "in a heartbeat," says Eliot Spitzer, the New York attorney general, who went after Merrill Lynch while the Pitt S.E.C. slept. "All he has to do is call Oxley" — Michael Oxley, who is steering a weak Republican "reform" bill through the House — "and say this is the bill we're passing instead." But that's about as likely as Martha Stewart discovering a cure for cancer instead of trying to cash in on one. Mr. Bush has already opposed the notion of requiring corporations to count executive stock options as expenses — a simple fix endorsed by Alan Greenspan and Warren Buffett as an antidote to fictional profits. The Treasury Department, Newsweek reports, is hard at work stifling a bill that would end the offshore shenanigans that allowed Enron (with 800-plus such entities) to evade taxes in four out of five years."
"It's not that Democrats are clean. When Al Gore blasted Mr. Pitt last weekend for having led the accounting industry's drive "to open up loopholes" in the 1990's, he could have been describing his own ticket mate, Joe Lieberman, who was second to none in doing the accounting industry's bidding. But the Democrats don't have the power to undo the damage anyway. It is Mr. Bush who is C.E.O. If he doesn't bring zero tolerance of corporate cheating to his own White House, it's hard to imagine Americans rushing back into the market trusting that his administration will enforce it anywhere else."
This is a time for leadership. That is what the head economist of Morgan Stanley, Stephen Roach said on July the 4th. I told people when Bush got elected that in the next four years one of two things would happen. He'd sit there like a dummy and let Alan Greenspan ruin the economy or he'd fire him and get re-elected. Now almost 2 years later the US financial system is on the verge of collapse thanks to a record government and current account deficit that is creating a dollar crisis. I'll address that tomorrow.
But today was a major disappointment for those of us expecting Bush to do something. He couldn't stand up to big business corruption like Teddy Roosevelt, Franklin Roosevelt, John F. Kennedy, or Andrew Jackson did during their times. He's not a Bill Clinton. But is he a leader? So far he hasn't been one. He has just been another politician. He hasn't vetoed one single spending bill since he has been in office. |
