June 30, 2002
From the desk of Mindles H. Dreck:Wouldn't have happened?
Al Gore, like Krugman, Scheer and others, is trying to pin the current corporate Scandalaise on Bush.
The idea that most directly implies Bush administration culpability for Enron is, unfortunately for these critics, the silliest. They make the amusing and tired assertion that if Phil Gramm's wife hadn't exempted Enron from CFTC regulation, and congress had not passed the Commodity Futures Modernization act, Enron would not have failed. This is absurd on its face - as absurd as saying Clinton was responsible for the failure of Long Term Capital Management.
Looking at history, one might conclude that scandal and fraud are more common in regulated rather than unregulated industries. Librarian Roy Davies has helpfully compiled a a list of 30 of the biggest financial scandals in the last twenty years. I count seven that involved regulated commodities and futures trading, the CFTC's bailiwick. In fact, all but a handful of these scandals involved regulated entities.
Furthermore, when a company is regulated, they typically isolate the regulated activity in a subsidiary. When you consider that the bulk of Enron's problem assets were hidden in affiliates, it seems increasingly unlikely that CFTC regulation would have made much difference. Finally, the CFTC exists primarily to protect commodities investors and the exchanges, areas where Enron was not particularly active.
Yessirree, that CFTC regulation would have been pivotal.
Oh, by the way, there was a futures trading scandal some years ago involving a company that was "allocating trades". Allocating means doing a bunch of trades and then deciding whose account to put them in later. It's an old scam that allows a broker to run a ponzi scheme whereby he makes sure new, growing clients get the winning trades, and older ones get the losers. The CFTC, which specifically prohibits allocating trades, regulated the entity and brokers in question, who ultimately settled. That was long after they made a suspiciously tidy sum in cattle futures for a certain Governor's wife.
For those still trying to blame the world's problems on the Clintons, it's too bad Enron wasn't regulated by the CFTC. Then they could have blamed Enron on Clinton and been just as credible as Robert Scheer. Actually, they already are.
Posted by Mindles H. Dreck at June 30, 2002 10:26 PM | Technorati inbound links"); ?>