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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: Mephisto who wrote (4536)	10/1/2002 4:51:36 PM
From: Mephisto	Respond to of 5185

Dealing With W "Remember the proposal to give retroactive tax breaks to ChevronTexaco and Enron? The New York Times October 1, 2002 By PAUL KRUGMAN TOKYO - I got obsessed with the Japanese economy after it was fashionable. Americans paid a lot of attention to Japan in the 1980's, when Japanese manufacturers were conquering the world. Remember when airport bookstores were filled with management tomes bearing samurai warriors on their covers? Then Japan's bubble burst, and most Americans concluded that we had nothing to learn from Japan - except how a country can stumble when it lacks adequate business and political leadership. And we, of course, don't have that problem. Or do we? Jack Welch's gut is starting to look as overrated as those business samurai. And our political leadership doesn't exactly inspire confidence. In fact, lately I've started to have a truly depressing thought: Bad as Japan's policy has been, it's possible that the United States will do even worse. It's hard to say anything good about how Japan has handled its post-bubble economy. But I've worried for years about how other countries would deal with similar problems. Sure enough, as America tries to cope with its own burst bubble, it's a lot easier to see how bad economic decisions get made. It's true that Alan Greenspan and his colleagues made a much better start than their counterparts in Japan. They knew that the Bank of Japan cut interest rates too slowly, and that by the time it realized the seriousness of the country's problems it was too late: even a zero interest rate wasn't enough to spark a recovery. So the Fed cut rates early and often; those 11 interest rate cuts in 2001 fueled a boom both in housing purchases and in mortgage refinancing, both of which helped keep the economy from experiencing a much more severe recession. But it's starting to look as if the interest rate cuts weren't enough. I don't need to tell you about the stock market. Economic indicators strongly suggest that the economy is either sliding into a double-dip, "W-shaped" recession - bet you thought I was talking about the guy in the White House - or close enough as makes no difference. Bond markets are clearly predicting that the Fed will have to cut interest rates again. What if the Fed, like the Bank of Japan, goes all the way to zero and finds that it still hasn't turned the economy around? Not many people realize that in some ways Japanese economic policy responded quite effectively to a sustained slump. It's easy to make fun of the country's enormous spending on public works - all those bridges to nowhere in particular, highways with no traffic, and so on. Without question enormous sums have been wasted. But it's also clear that all that spending pumped money into the economy, preventing what might otherwise have been a full-fledged depression. So what will be the U.S. equivalent? Right now we are in effect following the reverse policy: slashing domestic spending in the face of an economic slump. Some of this is taking place at the federal level; the Bush administration is nickel-and-diming public spending wherever it can, shaving a billion here, a billion there off everything from veterans' benefits and homeland security to Medicare payments. More important, the federal government is doing nothing to help as state and local governments, their revenues savaged by recession, make deep cuts in spending on everything that isn't urgently necessary, and many things that are. It's true that we haven't yet confronted head on the possibility that Uncle Alan may not be able to save us single-handedly. But last fall's debate over economic stimulus suggested that our political leadership cannot make a rational response to economic problems. Where economists saw danger, the White House and its Congressional allies saw opportunity - an opportunity to ram through more tax cuts for corporations and the affluent, measures that suited their political agenda but had almost no relevance to the economy's problems. Remember the proposal to give retroactive tax breaks to ChevronTexaco and Enron? In the end, the need for stimulus was less urgent than it seemed at the time, but there is no reason to think that we'll do better if, as now seems all too likely, the recovery stumbles. Of course, the worst thing of all would be if our leadership decides that economics is not its thing, if it simply tries to distract the public from rising unemployment and plunging stocks by going off and invading someone. But we don't have to worry about that, do we? Copyright The New York Times Company nytimes.com

To: Mephisto who wrote (4536)	10/13/2002 11:55:08 PM
From: Mephisto	Respond to of 5185

[ Corporate Reform: Ballgame Lost] Molly Ivins creators.com by RELEASE: TUESDAY, OCTOBER 8, 2002, AND THEREAFTER AUSTIN, Texas -- We just lost the whole ballgame on corporate reform without the news even making it to the front page. The sick, sad tidings were tucked away discreetly on the business pages: "SEC Chief Hedges on Accounting Regulator." Now there's a sexy headline. All of you who were shafted by Enron, shucked by Worldcom, jived by Global Crossing, everyone whose 401(k) is now a 201(k) (I think that's Paul Begala's line), you just got screwed again. They're not going to fix it. They've already called off the reform effort; it's over. Corporate muscle showed up and shut it down. Forget expensing options, independent directors, going after offshore shams, derivatives regulation. For that matter, forget even basic reforms like separating the auditing and consulting functions of accounting firms and rotating accounting firms every few years. Bottom line: It's all going to happen again. We learned zip from the entire financial collapse. Our political system is too bought-off to respond intelligently. Even the normally impeccable Lou Dobbs had taken to referring to SEC Chairman Harvey Pitt as "a reformer," a usage that stretches the language. Pitt, President Bush's appointee to the chair of the Securities and Exchange Commission and a career-long mercenary for the securities industry, is the lawyer who memorably advised in one law journal article: If you get in trouble, shred the evidence. He came in promising to make the SEC "a kinder, gentler place for accountants." This unpromising champion of reform -- appointed to keep the corporations happy -- came under such heavy political fire during the financial collapse that he was suddenly out there flirting with Paul Volcker, Arthur Levitt and other genuinely concerned citizens with actual ideas about how to fix this ghastly mess. No mas. According to The New York Times: "Harvey L. Pitt, under pressure from Republicans and former clients in the accounting industry, is backing away from the choice he and other members of the SEC favored to lead the new federal agency that will oversee the industry. Industry executives and at least one prominent Republican lawmaker complained that the top choice, John H. Biggs, was too tough on the industry." Biggs, the citizen in question, is head of the pension investment plan TIAA-CREF -- not exactly a commie. Nevertheless, he has spoken up strongly for the need to make companies more stringently accountable for stock options, making companies rotate their auditors every few years, and for separating the auditing and consulting functions of accounting firms. Gee, how bold and daring of him. Quel overthrow of capitalism is implied by these obvious, fundamental reforms. The Sarbanes bill set up a new five-member board to oversee the accounting industry. Biggs was the much-touted choice to head this board -- both Pitt and another SEC commissioner had announced their support -- when, oops, the accounting industry weighed in. "Congressional aides and current and former SEC officials say the episode illustrates the continued political influence of the accounting profession despite its defeat ... on the Sarbanes bill." Duh. Lynn Turner, former chief accountant for the SEC, told the Times, "It appears that the accounting firms, the Republicans and now chairman Pitt are trying to circumvent the Sarbanes legislation by making certain that the board does not include a reform-minded person: If we lose Biggs, we lose a reform-minded board." The ever-flexible Rep. Michael Oxley, R-Ohio, chairman of the House committee that oversees the SEC, is one of my favorite players in the corporate scandals. First, he was against reform. Then the pressure for reform got so strong even the White House rolled over in front of it, and Our Man Oxley became a reformer, too, signing on to the Sarbanes bill. But now he wants a person of "moderate views," as opposed to this reincarnation of Lenin, the head of a major pension fund. You will not be amazed to learn that Oxley's major contributors are securities and investment firms, commercial banks, insurance, finance and credit companies, and accounting firms. You got to dance with them what brung you. The Wall Street Journal reports that in addition to pressure from Oxley, Pitt ran up against major lobbying muscle form the accounting industry and further bobbled the appointment by failing to consult two new SEC commissioners. So now we are to get an industry-approved board -- just what we need. The Senate Governmental Affairs Committee issued its report on Enron on Sunday, blaming the SEC for "systemic and catastrophic failure." It is a comprehensive and utterly damning evaluation about which, it now appears, the Pitt-led SEC is prepared to do absolutely nothing. Several months ago, after it was disclosed that Pitt had met with the CEOs of some companies then under investigation by the SEC, The Wall Street Journal's editorial board (not to be confused with The Wall Street Journal -- I'm convinced those people don't even read their own paper) called for Pitt's resignation. Must have been a blue moon, because they were right. To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com. COPYRIGHT 2002 CREATORS SYNDICATE, INC. Originally Published on Tuesday October 8, 2002

To: Mephisto who wrote (4536)	4/7/2003 10:57:44 PM
From: Mephisto	Respond to of 5185

[ California Energy Crisis ] Editorial Boston Globe THREE YEARS AGO California suffered electricity shortages and skyrocketing rates that state officials said were caused by manipulation of the state's partially deregulated power system by Enron and other energy suppliers and traders. No, said Bush administration officials, at fault were environmental hurdles to new power sources. A recent report by the Federal Energy Regulatory Commission backs the state officials: It says energy companies like Enron played the state's power market like a fiddle, pumping prices thirtyfold at some points in the crisis. To California's dismay, the report says consumers might be entitled to as little as $3.3 billion in refunds; the state claims they are owed $8.9 billion. The exact amount will be determined by a lengthy regulatory process followed by a possible court challenge. To win back some of the massive economic loss caused by the crisis, which was pegged at $45 billion by the Public Policy Institute of California, the state should fight for every dime it can get. Doing so should also deter such manipulation in the future, in California and elsewhere. boston.com

To: Mephisto who wrote (4536)	8/19/2003 8:12:29 AM
From: Mephisto	Respond to of 5185

The Road to Ruin August 19, 2003 The New York Times OP-ED COLUMNIST By PAUL KRUGMAN We still don't know what started the chain reaction on Thursday. Whatever the initial cause, however, the current guess is that a local event turned into an epic blackout because the transmission network has been neglected. That is, the power industry hasn't spent enough on the control systems and safeguards that are supposed to prevent such things. And the cause of that neglect is faith-based deregulation. In the past, electric power was considered a natural monopoly. It was and is impractical to have companies competing either to wire up homes and businesses, or to build long-distance transmission lines. Because effective competition was impossible, power companies were given local monopolies, and regulated to keep them from exploiting customers. These regulated monopolies took responsibility for the whole system - transmission and distribution as well as generation. Then came the deregulation movement. It argued that a competitive market could be created in power generation (though not in transmission and distribution), and in much of the country utilities were forced to sell off their power plants. In fact, effective competition has been elusive even in power generation. In California, deregulation led to one of history's great policy disasters: energy companies drove up prices by creating artificial shortages. This plunged the state into a crisis that ended only after much of its electricity supply was locked up in long-term contracts, and price controls were imposed on the rest. Incidentally, there seems to be a weird reluctance to face up to what happened in California. Since the blackout, I've seen national news reports attributing California's woes in part to environmental restrictions, while ignoring the role of market manipulation. Huh? There's no evidence that environmental restrictions played any role; meanwhile, even the Federal Energy Regulatory Commission, which strongly backs deregulation, has concluded that market manipulation played a major role. What's with the revisionist history? Anyway, market manipulation aside, energy experts have long warned that deregulation would lead to neglect of the grid. Under the old regulatory system, power companies had strong incentives to ensure the integrity of power transmission - they would catch the flak if something went wrong. But those incentives went away with deregulation: because effective competition in transmission wasn't possible, the companies providing transmission still had to be regulated. But because regulation limited their profits, they had little financial incentive to invest in maintaining and upgrading the system. And because of deregulation elsewhere, responsibility was diffused: nobody had a strong stake in keeping the system reliable. The result was a failure not just to add capacity, but to maintain and upgrade capacity that already existed. These experts didn't necessarily oppose deregulation; their point was that deregulation could lead to disaster unless accompanied by policies not just to keep the grid reliable, but to expand it. (To make competition possible, a deregulated system needs considerably more transmission capacity than one based on regulated monopolies.) But their warnings weren't taken seriously; politicians and deregulation enthusiasts simply had faith that somehow "the market" would take care of the problem. Four years ago, Paul Joskow of M.I.T. told FERC: "Proceeding on the assumption that, at the present time, `the market' will provide needed network transmission enhancements is the road to ruin." And so it was. Have we learned our lesson? Early indications are not promising. President Bush now says that "our grid needs to be modernized . . . and I've said so all along." But two years ago Tom DeLay blocked a modest Democratic plan for loan guarantees for system upgrades, calling it "pure demagoguery." And press reports say that despite the blackout, the administration will bow to pressure from Senate Republicans and put on ice the only part of its energy plan that had any relevance to the blackout, a FERC proposal for expanded oversight of the transmission system. This nation needs to invest billions in its power grid, yet given recent history, it's crucial that this investment not be simply another occasion for energy-industry profiteering. Somehow, I'm not optimistic. nytimes.com Copyright 2003 The New York Times Company