There Are More Enrons Out There; The Rot is Systemic – article by William Greider
from The Nation newspaper
source: http://www.commondreams.org
The collapse of Enron has swiftly morphed into a go-to-jail financial scandal, laden with the heavy breathing of political fixers, but Enron makes visible a more profound scandal–the failure of market orthodoxy itself. Enron, accompanied by a supporting cast from banking, accounting and Washington politics, is a virtual piñata of corrupt practices and betrayed obligations to investors, taxpayers and voters. But these matters ought not to surprise anyone, because they have been familiar, recurring outrages during the recent reign of high-flying Wall Street. This time, the distinctive scale may make it harder to brush them aside. “There are many more Enrons out there,” a well-placed Washington lawyer confided. He knows because he has represented a couple of them.
The rot in America’s financial system is structural and systemic. It consists of lying, cheating and stealing on a grand scale, but most offenses seem depersonalized because the transactions are so complex and remote from ordinary human criminality. The various cops-and-robbers investigations now under way will provide the story line for coming months, but the heart of the matter lies deeper than individual venality. In this era of deregulation and laissez-faire ideology, the essential premise has been that market forces discipline and punish the errant players more effectively than government does. To produce greater efficiency and innovation, government was told to back off, and it largely has. “Transparency” became the exalted buzzword. The market discipline would be exercised by investors acting on honest information supplied by the banks and brokerages holding their money, “independent” corporate directors and outside auditors, and regular disclosure reports required by the Securities and Exchange Commission and other regulatory agencies. The Enron story makes a sick joke of all these safeguards.
But the rot consists of more than greed and ignorance. The evolving new forms of finance and banking, joined with the permissive culture in Washington, produced an exotic structural nightmare in which some firms are regulated and supervised while others are not. They converge, however, with kereitzu-style back-scratching in the business of lending and investing other people’s money. The results are profoundly conflicted loyalties in banks and financial firms–who have fiduciary obligations to the citizens who give them money to invest. Banks and brokerages often cannot tell the truth to retail customers, depositors or investors without potentially injuring the corporate clients that provide huge commissions and profits from investment deals. Sometimes bankers cannot even tell the truth to themselves because they have put their own capital (or government-insured deposits) at risk in the deals. These and other deformities will not be cleaned up overnight (if at all, given the bipartisan political subservience to Wall Street interests). But Enron ought to be seen as the casebook for fundamental reform.