this is a tad unfair to old Newt, that old toad. The Newtish ideology is at the center of what caused all of the finacial shenanigans, but the ideology is pretty old: it's _laissez-faire_ (a.k.a., neo-liberalism), a vision that goes back to the Physiocrats, I believe.
history repeats itself (though never exactly): the last big waves of laissez faire in the US happened in the gilded age and the 1920s... to be followed by financial crises and scandals. Waves of more statist liberalism followed, pushing for clean business and government (progressivism in the early 20th century, New Dealism in the 1930s). Whether the interests of the working class and other dominated sectors are served depends on how well they're organized.
JD
-----Original Message-----
From: Rob Schaap
To: [EMAIL PROTECTED]
Sent: 6/29/2002 5:04 AM
Subject: [PEN-L:27386] Good analysis of WCOM and Credit Bubble
And another from Red Herring:
http://www.redherring.com/columns/2002/friday/lastword062802.html
Blame Newt Gingrich for WorldCom
The former speaker of the
house and his fellow Republican Revolutionaries of 1994 are responsible
for today's accounting scandals.
by Jason Pontin
June 28, 2002
I am like one of those monomaniacs who
button-hole you at parties--ranting about bird-watching, say, and
jabbing you in the chest. I can't stop writing about corporate
malfeasance.
But I can add something new, and controversial: I know
who's responsible for the fraudulent
accounting that allowed WorldCom,
Enron, Global Crossing, and others to deceive investors.
It was Newt Gingrich--Newt, and the ideologically
over-heated, maniacally anti-government, anti-regulatory House
Republicans
who came to office in the fall of 1994.
Here's why. In three specific cases--tort
reform, the accounting of options, and the separation of an accounting
firm's audit and consulting services--House Republicans successfully
sought to block regulation that would have made corporations
transparent. Without Newt Gingrich, there would have been no crisis in
business and accounting, at least in this form.
Take torts, for example. Tort-reform
legislation to curb shareholder lawsuits against companies and
accountants was at the top of the agenda of the pro-business Gingrich
Republicans. Silicon Valley high-tech firms aligned with the accounting
industry to lobby the House of Representatives and the Senate to pass a
bill that would discourage "frivolous" lawsuits. President Clinton
vetoed
the bill, called the Private Securities and Litigation Reform Act of
1995, saying that it would penalize investors with legitimate claims.
However, the Senate (although Democratic, eager to appease the
then-powerful House Republicans and show the nation that they were both
pro-business and anti-government) overturned the president's veto in
December 1995.
Supporters of the legislation maintain that
it was a much-needed brake on runaway lawsuits, which threatened to
damage accounting and high-technology businesses. But fear of
shareholder lawsuits would have provided an important disincentive to
the accounting irregularities that allowed companies to misrepresent
their earnings.
Or consider options accounting. In 1993, the
Financial Accounting Standards Board (FASB) proposed closing an
accounting loophole that allowed companies to avoid recording stock
options on their balance sheets. The proposal, needless to say, both
alarmed and outraged corporations. According to a Merrill Lynch study,
expensing stock options would have slashed profits among leading
high-tech companies by 60 percent on average. Corporate America aligned
with
the accounting industry to fight the FASB proposal. In 1994, both
Democrats and Republicans in the Senate voted down the proposal 88 to 9.
And because stock options were not (and are not still!) accounted for as
expenses, companies like Enron and WorldCom felt emboldened to
misrepresent their operating costs as off-the-books capital expenses.
This little loophole was the start of a kind of open season, one where
FASB would not reform the commonly accepted accounting principles; it
said that the SEC would not closely scrutinize audits; it was the start
of a deregulatory free-for-all. Indeed, it was the wild west.
As Jim Leisenring, the vice chairman of FASB
from 1988 to 2000, recently said on National Public Radio, "We switched
from talking about 'Have we accurately measured the option?' or 'Have we
expensed the option on the proper date?' to things like 'Western
civilization will not exist without stock options' or 'There won't be
jobs anymore for people without stock options.' ... People tried to take
the argument away from the accounting to be just plainly a political
argument."
So, too, when Arthur Levitt, the chairman of
the U.S. Securities and Exchange Commission from 1993 to 2000, proposed
separating the consulting and auditing business of accountants because
they constituted a clear conflict of interests, he was defeated by
Gingrich-ite elements in the Congress. Mr. Levitt has called this the
greatest mistake in his years at the SEC.
The Senate has proposed a tough-minded reform
of FASB and America's so-called "generally accepted principles of
accounting." But will it pass? Unlikely. A Gingrich-ite president has
said that he supports the much softer House Bill.
