Moles at Work
The New York Times
October 11, 2002
By PAUL KRUGMAN
So here's my theory: Michael Oxley, Harvey Pitt and George W. Bush are all Communist
moles who have worked their way into the center
of the capitalist system in order to destroy it.
How else can you make sense of their actions?
It's true that in July they grudgingly agreed to a corporate reform bill,
which briefly calmed the growing investor panic. That was because it's
essential for them to control Congress - they need maximum leeway
to wreck the U.S. economy . But then they found a better answer.
Saber-rattling over Iraq does double duty.
It distracts the media: on Wednesday the Dow fell 215 points, hitting a nearly
five-year low, while consumer confidence fell to levels not seen since 1996,
yet neither story was treated as front-page news. And war talk
itself helps depress stocks and consumer confidence, and further
undermines the economy.
The master stroke came last week. Even as evidence mounted that the wheels
are coming off our so-called recovery, the conspirators carefully
destroyed the credibility of July's corporate reforms. The Financial
Times reports that it wasn't just Congressional Republicans and the
accounting industry that blocked the appointment of John Biggs to
head a crucial new accounting oversight board; the White House was
"concerned at labor union backing for Mr. Biggs."
Now that the best candidate has been humiliated and betrayed, nobody
of stature will take the post. That means corporate reform is dead in
the water. And if the conspirators hold the House and regain the Senate,
they can proceed with their wrecking program - driving the budget
even deeper into long-term deficit, scaring small investors and blocking
any actions that might pull the economy out of its deepening funk.
O.K., I'm not quite sure about this theory. There is another theory
that might explain what these guys are doing. They may simply be
constitutionally incapable (actually, given the presence of John Ashcroft,
make that unconstitutionally incapable) of doing what has to be
done.
What we've learned over the past year is the extent to which the modern
business game is rigged in favor of insiders. Self-dealing has become
pervasive: incredibly generous executive compensation, sweet-deal loans
and preferential access to I.P.O.'s were standard practice in many
companies that have not yet become targets of S.E.C. investigation.
And deceptive accounting, which lured the public into buying
stock even as insiders were bailing out, must have been very widespread
indeed. In the last three years of the bubble reported corporate profits soared,
but the overall measure of profits calculated by the U.S.
Commerce Department, which is unaffected by the maneuvers
companies use to cook their books, hardly grew at all.
In short, the fix was in. If we're to have a real recovery, it's urgent that
ordinary investors be reassured that those days are over. Yet it may be
hard for our current leaders to understand that urgency: all their lives, the fix
has been in on their behalf.
Wednesday's Wall Street Journal reported another piece of the
Harken Energy story, one that provides even more evidence of how family
connections smoothed Mr. Bush's business career. The key defense against charges
that his sale of his Harken stock amounted to insider
trading has always been the fact that while that stock's price plunged
soon after he sold his shares, it then recovered, albeit temporarily.
Now we know why it recovered. It wasn't just the mysterious invitation
to drill for oil off Bahrain. Harken also pulled a trick that would be
emulated on a larger scale by Enron: In effect it borrowed money to pay
its bills, while using loopholes in accounting rules to conceal the
resulting debt.
What made the trick possible was Harken's guardian angel,
a powerful institution controlled by an oil man, Robert Stone, who was a strong
political supporter of Mr. Bush's father. This institution acquired a large
stake in Harken as soon as Mr. Bush became a board member, and
subsequently showed itself willing to do whatever it took to keep the
hapless company afloat. This included taking much of the company's
debt off its books in return for assets of doubtful value, and giving Harken a
share in their partnership almost twice as large as its
contribution to the partnership's capital.
The name of the guardian angel? The Harvard University endowment.
Don't be surprised; professors don't run the university's money.
nytimes.com
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