July 01, 2002
Did Clinton Cause Enron/WorldCom?
Well, you can see the rightwing talking points in motion, as telepundits and rightwing scribblers now mouth the mantra-- Clinton's lying about a blowjob led corporations to think it was okay to defraud the public and encourage trillions of dollars in phantom sceculation. (Thanks TalkingPoints for the links).
...Now, I am notoriously soft on Clinton among my lefty friends, but on this one, Clinton does not deserve the abuse. In fact, he deserves praise for fighting the investment companies and auditors lobby for much of his Presidency.
...Aside from the silliness of the GOP line (and the echo of Newt Gingrich's sociological explanation that liberalism led to that South Carolina mother deliberately driving her kids into a lake to their death a few years ago), how about this for an alternative explanation?
...In 1995, the new Gingrich-led Congress passed a law that said it was largely okay for companies to lie about expected revenues. This law, the Private Securities Litigation Reform Act of 1995, also made it far harder for plaintiffs hurt by corporate lies to even get into court to try their case.
...Last year, BusinessWeek highlighted how the 1995 law had allowed companies to lie to investors, yet escape liability when the stock market melted down.
...And Clinton's role? He vetoed the damn thing, and it only passed because Congress overrode his veto. If anyone deserves to be saying "I told you so", it's Clinton. The GOP leadership should be embarassed at their hypocrisy.
...While Clinton said he was willing to support reforms that decreased frivolous lawsuits, he saw this 1995 law as an attack on honest plaintiffs that would hurt investors scammed by companies. And he was right. In Clinton's veto message, he wrote:
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. Unfortunately, changes made in this bill during conference could well prevent that.Yet the GOP and enough Democrats voted for the law to override Clinton's veto. In fact, due to corporate lobbying, this was the only veto Clinton made in his Presidency which was not sustained by Congress. Clinton was standing shoulder to shoulder with Nader on this one. For the villians of this piece, check out the Congressional role call on final passage in the House and in the Senate.
This country is blessed by strong and vibrant markets and I believe that they function best when corporations can raise capital by providing investors with their best good-faith assessment of future prospects, without fear of costly, unwarranted litigation. But I also know that 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...
While it is true that innocent companies are hurt by frivolous lawsuits and that valuable information may be withheld from investors when companies fear the risk of such suits, it is also true that there are innocent investors who are defrauded and who are able to recover their losses only because they can go to court. It is appropriate to change the law to ensure that companies can make reasonable statements and future projections without getting sued every time earnings turn out to be lower than expected or stock prices drop. But it is not appropriate to erect procedural barriers that will keep wrongly injured persons from having their day in court.
And Clinton's actions did not stop there. His appointee as head of the Securities and Exchange Commission, Arthur Levitt, had been warning that the collusion of brokerage houses and auditors with clients was a recipe for fraud and abuse. Levitt early on was warning that "earnings management" was leading to accounting abuse and fraud. Check out this speech at NYU in 1998.. Levitt's SEC passed a "Fair Disclosure" regulation to prevent companies from passing on select information to favored brokerage houses, but not to the general public. But when Levitt proposed tighter regulation of auditors, the industry fought back with one of the ugliest lobbying campaigns in SEC history, as detailed by this Common Cause report. While Clinton and Levitt could no doubt have done more to defeat the financial fraud lobby, it takes cajones the size of Texas for the GOP leaders, who pimped for the auditing industry, to try to divert attention from their own actions.
Posted by Nathan at July 1, 2002 08:20 AM
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