AUSTIN, Texas -- Let's review what we got with the Sarbanes bill, so proudly
declared by President Bush (who opposed the entire package until a few weeks ago)
to be "the most far-reaching reform of American business practices since
the time of Franklin Delano Roosevelt."
This bill, which would never have seen the light of day had the stock market
not tanked, fixes one of the Three Little Horrors that set up Enron Economics.
Good on Senator Sarbanes and all who toiled with him to pass it. Lord knows,
many years at the Texas Legislature have taught me how hard it is to pass a bill
supported by no special interest, but only in the public interest. Practically
a miracle. Righteous hosannas to all.
But it still fixes only one of the Little Horrors and touches neither of the
two Big Ones. Hearing Mr. Bush claim "the era of low standards and false
profits is over" was painful. No, it's not. (I guess that makes Mr. Bush
a false prophet himself.) The Little Horrors were small only in the amount of
attention they got, not in the effects they have had. Starting sequentially, they
1999 and 2000, Arthur Leavitt's proposal to separate the auditing and
consulting functions of accounting firms goes down disgracefully after the financial
industry spends millions.
What the Sarbanes bill fixes is the last of the three horrors -- separating
the auditing and consulting functions. The need is painfully obvious after the
Enron-Arthur Andersen debacle, but even this step will depend on whether the Securities
and Exchange Commission, now chaired by Harvey Pitt, who has spent nearly his
entire career as the paid champion of the accounting industry, will appoint a
decent "independent board" to oversee the accountants.
Now let's go back to Little Horror Numero Two: aiding and abetting. Those
of you who can stand to read the financial pages are still finding daily reports
of just how pervasive the corruption has become. Both bankers and brokers were
in bed with Enron in the most questionable set of dealings imaginable. Been wondering
who was in on all those secret offshore, off-balance-sheet partnerships of Enron's?
Try 96 executives of Merrill Lynch, which was one of Enron's investment bankers.
And when the investigators turn over more rocks, they're going to find more
Now let's move on to the Two Big Horrors: telecommunications deregulation
in 1996 and banking deregulation in 1999 -- the latter a bill sponsored and passed
by our very own, very special Sen. Phil Gramm, the gentleman from Odessa (that's
an old Texas expression that means something else). The reason these two are of
special interest is that they have not yet done all the damage they will do. There
is still time to correct them. There is still time to prevent greater disasters.
The 1996 Telecommunications Act may actually be the single worst piece of
legislation passed during the entire Newt Gingrich era. It was written by lobbyists
for telecom, and lobbyists for telecom bought it through Congress.
Sen. John McCain, who to his eternal credit voted against the bill, tried
to salvage one good thing out of the whole deal -- a pledge from the industry
to wire schools and libraries for computers, gratis. One of the people who pushed
hard for that little saving grace was then-Vice President Al Gore.
Lo and behold, less than three years later, the telecom industry reneged on
wiring schools, listing the expense -- which it had promised to underwrite --
on its bills and calling it "the Gore tax." I have never met Mr. McCain
in my whole life, but he called me one day in 1999 -- after I had written an angry
column about the industry's "Gore tax" ploy -- and said: "This
is John McCain. You were right. I was wrong." And then he hung up.
Ah, but worse, far worse, is Mr. Gramm's 1999 banking deregulation act.
After reporting on a financial news channel last week that both Citigroup and
JP Morgan Chase are up to their ears in the Enron debacle, some cheerful blonde
piped up, "But of course, Citigroup will never be allowed to fail, because
Citigroup is Too Big to Fail."
As we often say in Texas when confronted with the improbable, "No doo-doo?"
Molly Ivins is a columnist for the Fort Worth Star-Telegram.
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