How the Clinton Administration and the Democrats Tried to Prevent the Enron Disaster from Happening
By Paul Begala
Former Clinton advisor
Â· Stopping Auditor-Consulting Conflicts by Accountants
2000: Clinton Securities and Exchange Commission Chair Arthur Levitt proposes regulations to prohibit accounting firms from simultaneously serving as consultants and auditors. Anderson and other accounting firms marshall a massive lobbying campaign against the Clinton-Levitt regs, killing them. The lead lobbyist for the accounting firms is Harvey Pitt. After being sworn in as President, Bush makes Pitt chair of the SEC.
Â· Greater Disclosure of Derivatives
1997: Clinton Commodities Futures Trading Commission Chair Brooksley Born proposes greater regulation (by way of more stringent disclosure) of derivatives. Her proposal is beaten back by House Republicans, including then-House Banking Committee Chair Jim Leach (R-IA) who scolded her for two hours at a hearing;
Â· CFTC Oversight of Energy Traders
2000: William Rainier, Born's successor as chairman of the Commodity Futures Trading Commission, told Congress he was "deeply concerned" about a bill to exempt energy trading from CFTC review, noting that those who trade energy derivatives were not subject to any other oversight. Rainer's objections were largely ignored by the Republican-controlled Congress, and the exemption, heavily backed by Enron, became law;
Â· Cracking Down on Tax Havens
2000: Clinton Treasury Secretary Larry Summers proposes a crackdown on tax havens such as those used by Enron. With the US co-chairing the OECD's Forum on Harmful Tax Practices, Summers crusades for a crackdown on money-laundering and tax havens. His proposal is opposed by the GOP Congress. When the Bush Administration takes office, Treasury Secretary Paul O'Neill abandons Summers' crusade, telling the Wall Street Journal, "The government has not been respectful of the cost it imposes on society." The New York Times reports that Bush's top economic adviser, Lawrence Lindsey (a former economic adviser to Enron) also opposed efforts to crack down on tax havens.
Â· Protecting 401(k)s
1997: Sen. Barbara Boxer (D-CA) proposes banning investment of more than 10 percent of the total 401(k) plan in the employer's stock--the maximum that investment experts recommend a person sink into any company. The GOP Senate waters-down her bill so much it no longer applies to any corporation in America;
Â· Protecting Investors and Shareholders
On December 20, 1995, President Clinton vetoed the Public Securities Litigation Reform Act, which would have restricted lawsuits against corporation accused of securities fraud. In his veto message, Clinton presciently noted that while he supported the notion of reducing frivolous lawsuits: "I am not, however, willing to sign legislation that will have the effect of closing the courthouse door on investors who have legitimate claims. Those who are the victims of fraud should have recourse in our courts.
our markets are as strong and effective as they are because they operate -- and are seen to operate -- with integrity. I believe that this bill, as modified in conference, could erode this crucial basis of our markets' strength." The GOP Congress overrode Clinton's veto.