From the Publisher/Arnold York
Did you ever see four more unhappy looking guys than the four guys on the front page of the Los Angeles Times on Tuesday?
There they were: The former Anderson partner Melvin Dick, the former WorldCom CEO Bernard Ebbers, the former WorldCom CFO Scott Sullivan and analyst Jack Grubman, all sitting before a House committee.
They were in the process of discovering the hard realities of politics in the new millennium, and that is, when you take the Fifth, which Ebbers and Sullivan did, the Congress members sitting on the committee have carte blanche to beat the crap out of you. And you can’t say a word because if you do, you could end up waiving your Fifth Amendment rights. Not since the Spanish Inquisition has any society developed such a fine-tuned way of punishing miscreants.
So all those members proceeded to make speeches about how they are shocked, absolutely shocked (remember Claude Raines as Capt. Renault in the movie “Casablanca”?) that something underhanded may have taken place here. What they, of course, fail to mention while sputtering in righteous indignation, and what the witnesses certainly know, is that some of those congressmen probably got campaign contributions from WorldCom, or from their friends, or from the accounting industry that fought stronger rules and sanctions that might have kept this kind of thing from happening. And those contributions, so to speak, are all now inoperative.
Now I don’t really think these WorldCom guys are any worse, or, for that matter, any better than legions of other miscreants who marched before Congress in years past. They just appear to be a little bit greedier, and a little bit more brazen.
So what’s it all about and how do we fix it?
Part of it is deregulation and an almost religious belief in free markets. It’s not that the theory is bad. In fact, on a whole, I agree the theory is pretty good. And if the government gets involved, it probably will screw it up with all sorts of unnecessary regulation. The problem is, once you get unregulated markets, either by changing the laws (as what happened with energy) or just not enforcing them (as with Pitt at the SEC), the game goes wild. Guys like Ebbers are big, smart and very ambitious, and they want every dime on the table, and then every dime in your pocket. And while they’re at it, on the way out they’ll take the table, the chairs and the drapes and after slamming the door shut they’ll take the doorknob. The only way the game works, long-term, is if there is an unbiased referee. That can only be the government, but that has to mean agencies that really enforce their mandates. Unfortunately, that doesn’t mean kinder, gentler agencies.
Investors are now voting with their feet and pulling their money out of the markets. Pension funds are getting cautious. Foreigners are beginning to rethink investing in America and there are plenty of other stable countries happy to oblige them. We’ve got a bleed going on here that’s rapidly turning into a hemorrhage. President Bush made a speech today in New York to try and put a tourniquet on that hemorrhage. He promised to come down hard. He said there are bad people out there and they will be punished.
It didn’t work. It wasn’t enough and the markets were unimpressed. If the market continues to drift or drop and the dollar weakens, watch the panic set in, both financial and political. The Democrats smell blood in the water and there is an election in November.
I have absolutely no idea where this will all end. But I do know that a stock market based on an illusion that things can only go up, or an illusion that it doesn’t matter if a company is losing money just so long as it’s gaining market share, or if its stock is going up that’s all that counts and that you can give this year’s official genius CEO a $100 million salary, is certifiably nuts.
That’s not to say that there aren’t people who made lots of money in the dot-com boom or the telecommunications boom. But those weren’t people investing in our economy. Those were people riding a wave, a wave that ultimately crashed on the shore and they were smart enough, or lucky enough, to get off just before it broke.
What we need now are people not afraid to invest in our economy. And to be able to do so with the confidence that we’re not being scammed. And only the government, doing its job properly, can give us that confidence.
P.S. I hope to see many of you at the Coastal Commission hearing in Huntington Beach on Wednesday, beginning at 9 a.m.