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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (2967)	7/23/2002 11:28:10 AM
From: stockman_scott	Respond to of 89467

<<...JPMorg/Citi are the common link between Enron..>> IMO, the smart Hedge Funds will short both of them down into the single digits <VBG>.

To: Jim Willie CB who wrote (2967)	7/23/2002 11:38:06 AM
From: stockman_scott	Respond to of 89467

Living With Bears By PAUL KRUGMAN* Editorial / Op-Ed The New York Times July 23, 2002 It looks as if the authors of "Dow 36,000" — remember that? — may have had one digit too many in their title. Let's just hope it was an extra 3, not an extra 0. The bull market is now well and truly over. In fact, if you adjust for inflation the S.&P. 500 — a much better measure than the overused Dow — is now below its level in late 1996, when Alan Greenspan gave his famous "irrational exuberance" speech. So what should the responsible officials — Mr. Greenspan, George W. Bush and whatshisname, the Treasury secretary — be doing? A good first step would be to stop trying to talk up the market by extolling the economy's fundamental strength. For one thing, it reeks of desperation. For another, stocks are still richly valued compared with earnings. Most important, the fundamentals aren't actually all that great. Doubts about corporate governance are growing, not fading away. State and local governments are in a desperate fiscal crisis. And even before the sudden plunge in the markets, the data were pointing not to a boom but to a "jobless recovery," in which the economy grows too slowly to make much if any dent in the unemployment rate. Indeed, the report prepared in support of Mr. Greenspan's recent testimony projected no significant decline in unemployment this year, and not much decline next year. And in the face of plunging markets we have to worry whether even that forecast is overly optimistic. Given the definitely iffy economic outlook, shouldn't Mr. Greenspan be thinking seriously about another interest rate cut? True, rates are already very low. But if there's one thing we've learned from Japan's experience, it is that when you face the risk of a deflationary trap — still not the most likely scenario, but not as unlikely as it seemed a few months ago — it makes no sense to "save your ammunition," holding interest rate cuts in reserve. The time to fight deflation is before it has time to get built into the nation's psychology. True, the Fed has been concerned that another cut would panic the markets. But now that the markets have panicked on their own, there's nothing to lose. What about the rest of the government? Corporate reform is essential; if investors cannot be reassured that they are being treated fairly, they will take their money and go home. But we can't count on reform to provide an immediate boost to the economy; trust, once lost, cannot be restored in a moment. What else can the government do? Let's ignore the politics and look at the situation objectively. On one side, thanks in part to the end of the bull market the long-run federal budget outlook has worsened to an extent that has surpassed the expectations of even the biggest pessimists (like yours truly). Realistically, we are looking at a decade of deficits, which will eventually pose serious problems for Social Security and Medicare. On the other hand, with the recovery still wobbly, this is no time for fiscal austerity — if anything, right now the federal government ought to be pumping more money into the economy than it is. The obvious answer to this seeming dilemma is to loosen the reins now, but prepare to tighten them once the economy has fully recovered. For example, the Bush administration could move quickly to aid distressed state governments, avoiding harsh (and contractionary) cuts in essential programs. Meanwhile, to assuage worries about the long-run fiscal position, it could put on hold future tax cuts that were written into law back when visions of surplus sugarplums were still dancing in our heads. And after the administration takes these responsible steps, thousands of pigs will fill the skies over Washington. Look at it this way: The Bush administration's economic plans have not changed significantly since the fall of 1999, when they were introduced as a way to ward off a challenge from Steve Forbes. Back when the tax cut that eventually became law was announced, "Dow 36,000" was climbing the best-seller lists. The economic environment has changed completely; the administration's plans haven't changed a bit. Our economic problems are real, but by no means catastrophic. What scares me is the utter inflexibility of the people who should be solving those problems. _______________________________________________________ *Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as Professor of Economics and International Affairs at Princeton University. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics. Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes. His professional reputation rests largely on work in international trade and finance. nytimes.com

To: Jim Willie CB who wrote (2967)	7/23/2002 12:07:10 PM
From: stockman_scott	Read Replies (2) \| Respond to of 89467

Joe Lieberman’s Cover-Up Where is Robert Rubin? July 23, 2002 nationalreview.com The news this morning for Citigroup, Inc., one of Enron's largest creditors, is bad. The New York Times reports that "senior credit officers of Citigroup misrepresented the full nature of a 1999 transaction with Enron in the records of the deal so that Enron could ignore accounting requirements and hide its true financial condition, according to internal bank documents and government investigators." The Wall Street Journal reports that Enron "marketed similarly structured deals to a slew of other companies." And yesterday, the Washington Post reported that Citigroup, along with J. P. Morgan Chase & Co., "transferred billions of dollars to Enron ... in recent years in what amounted to loans that Houston energy trader concealed as it struggled to survive .…" Given the central role played by Citigroup in concealing Enron's debt from investors, the general public, and government regulators, why, then, hasn't former Clinton treasury secretary, Robert Rubin, now the chairman of Citigroup's executive committee, been called to testify before Congress? In particular, why hasn't the chairman of the Senate Governmental Affairs Committee, Senator Joseph Lieberman, sought Rubin's testimony? After all, Lieberman is heading up the Senate's investigation into Enron's bankruptcy and fraudulent dealings. And there's ample reason to hear from Rubin. In addition to this week's disclosures about Citigroup's assistance in cooking Enron's books, during Enron's final days Rubin played a direct role in attempting to conceal Enron's financial condition from credit-rating agencies. Specifically, on November 8, 2001, Rubin made a telephone call to Peter Fisher, the Treasury Department's undersecretary for domestic finance, seeking Fisher's intervention with Wall Street credit-rating agencies on behalf of Enron when those agencies were about to downgrade Enron's ratings. As reported on January 12, 2002 by the Associated Press, according to Treasury Department spokeswoman Michele Davis: "Rubin asked Fisher what he thought of the idea of Fisher placing a call to rating agencies to encourage them to work with Enron's bankers to see if there was an alternative to an immediate downgrade. Fisher responded that he didn't think it advisable to make such a call. Rubin said he thought that was a reasonable position. Fisher made no such call." Rubin's spokesman, Michael Schlein, told AP that Fisher's characterization of the phone call was "largely accurate." He added that Rubin "had prefaced the call by saying, 'This may not be the best idea,' and in the end agreed with Fisher that it wasn't a good idea." Neither the fact that the call was made nor the purpose of the call are in dispute. Moreover, AP reported that at a March 21, 2002 hearing before Lieberman and his committee, John Diaz, managing director of Moody's Investors Service, a major credit-rating agency, Diaz testified that Rubin had contacted him about seeking a higher credit rating for Enron. Diaz said nothing came of Rubin's telephone call. However, this was the second time Rubin intervened in an attempt to keep Enron's credit rating high. When asked why credit-rating agencies delayed the lowering of Enron's rating, Diaz said that Enron executives lied to his agency in the fall of 1999 about its complex web of partnerships and that "material information was missing." Consider Lieberman's remarkable reply: "I feel as if you weren't as aggressive as you should have been. We have got to look seriously at creating some kind of system of accountability and monitoring of what the agencies are doing." Yet, Lieberman knew that Rubin, on behalf of Citigroup — which had an approximate $1 billion investment in Enron and the potential of large merger and other fees in pending deals — on at least two occasions, sought personally to protect Enron's credit rating. Still, as best as I can tell, Lieberman has never asked Rubin to testimony before his committee. Furthermore, Carl Levin, chairman of the Senate Governmental Affairs Committee's Permanent Subcommittee on Investigations, which is holding a hearing today on "The Role of the Financial Institutions In Enron's Collapse," has, to the best of my knowledge, not sought Rubin's testimony. (An inquiry I made to Levin's subcommittee asking whether Rubin would be a witness at today's hearing went unanswered.) On January 14, 2002, while being interviewed about Enron's collapse on the NewsHour with Jim Lehrer, Lieberman said, in part: The stock was being touted by executives of the company, while they, in fact, were selling theirs and average stockholders were holding on and in the process of losing their life's savings, so this was a really shocking and unsettling scandal in which greed and arrogance, deception and fraud and maybe criminal behavior was involved. Lieberman's supposed concern for "average stockholders" and "their life's savings" clearly doesn't outweigh his political interests in covering up Rubin's central role in helping to prop up Enron and protect Citigroup's investments. If Lieberman were to force his fellow Democrat to testify about his conduct, the Democrats might lose their election-year issue. Meanwhile, Citigroup's stock value has declined by more than ten percent, to the lowest level in nearly three years, on news of its deceptive activities.