WASHINGTON — Fed Chairman Arthur Burns, worried that the impending collapse of Penn Central would roil the capital markets, suggested that the Pentagon arrange a loan to prevent bankruptcy. George Shultz, then the Nixon budget director, argued that government intervention would send the wrong message about risk-reward to our economic system.
The dispute was resolved when Bryce Harlow, the sage speechwriter-adviser, entered the Oval Office and said to President Nixon: "The board of Penn Central, in its infinite wisdom, has just hired your old law firm to help you decide. President, you can't touch this with a 10-foot pole."
Nixon took the advice not to meddle. The huge company went bankrupt — and the markets quietly absorbed the shock. No scandal touched the White House (until later).
We had another nonintervention in the Enron collapse. Kenneth Lay, chairman of the nation's seventh-largest company and a longtime political contributor, called a couple of Bush Cabinet secretaries to reveal his rapid unraveling. He was surely hoping for some government succor. The Bush Treasury and Commerce secretaries, without even consulting the president, decided not to mix in.
Then Robert Rubin, now a head of Citigroup, called a high official at Treasury. It was consistent for the man who, as Clinton Treasury secretary, arranged the bailout of Mexico to ask for government help in shoring up the credit rating of a customer that owed his bank $800 million.
Again, nothing was done by the Bush administration to intervene. Enron went down the drain — but the capital markets survived. Many investors and employees learned the hard way that capitalism is a risky business, but if the taxpayer were to assume all such risk there would be no market punishment for any management inefficiency or corruption.
As a card-carrying scandalmonger, I am moved to ask: Where's the scandal? Democratic Rep. Henry Waxman, after eight years with his eyes tightly shut, apparently thinks it scandalous that President Bush's men — at the first call from Lay — did not promptly step in to save the company from the consequences of the greed or predations of its managers. Bush is thus damned for what he did not do.
But at the same time, other scandalmongers are damning Bush for what he may possibly have done — such as getting briefed by anybody on his staff and thereby "knowing," or by having taken political contributions from today's villain back when Lay was a Houston hero.
The dozen or so investigations may turn up something to embarrass the White House, especially if Bush pulls another "executive privilege" when Congress wants facts. But the scandal I see in this corporate debacle is nonpolitical; it's professional.
This affair shows the accounting profession all too often to be in bed with the oldest profession. Accounting standards have been frequently prostituted by the new Uriah Heeps: These are executives in ever-merging firms afraid to challenge their clients' phony numbers and secret self-dealing because they might lose fees in the lucrative consulting business they run on the side.
These no-account accountants seem to forget that the "p" in CPA means "public." The Big Five are silent about Andersengate because they are eager to become the Big Four by carving up their competitor's carcass. That's why it's harder to find a major bean-counter willing to condemn publicly the failures of Arthur Andersen & Co. than to find a top Muslim cleric willing to criticize Osama bin Laden.
Although Andersen executives may try to cop a plea by ratting on the client they so supinely and profitably enabled, they must explain why, as the biggest bankruptcy in history loomed, their supervisors were so eager to remind those working on the Enron account to destroy records.
Self-dealing; asset-hiding; insider stock-dumping — all these were supposedly beyond the ken of an audit committee and legal counsel blindly reliant on the ethics and standards of "professional" accountants. It's a scandal, all right, and wrongdoers should pay in heavy civil damages, if not jail time.
But based on what we now know, it's not a political scandal. Bush's people, including former employees or consultants of Enron, did right by refusing to bail a campaign contributor out of its mess at public expense or by misleading investors. Taxpayers should be grateful.
New York Times News Service