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Sunday, Jul 12, 2009
President Bush's nominees to the agency that should have regulated Enron instead helped write the rules that let the company do whatever it wanted in the first place.
Jun 26, 2002 | Does anyone in the current administration even remember Enron? Judging by President Bush's two nominees to the Commodity Futures Trading Commission (CFTC), who appeared at Senate hearings on Tuesday, the answer is no.
If there was one thing that could legitimately be hoped for after the biggest corporate bankruptcy of all time, it was that accounting rules would be tightened, and the rush to dismantle regulatory oversight over the kind of complicated financial games that Enron specialized in would be reversed. But instead, the people most responsible for loosening the rules are being put in charge.
The CFTC is the government agency that is supposed to be the watchdog over such advanced "financial instruments" as derivatives trading. But Bush's nominees boast what critics call a laughable regulatory record. Walter Lukken is the drafter of a law passed in 2000 that gave Enron's online trading arm the right to act without a shred of oversight. Sharon Brown-Hruska is a free-market economist and protigi of Wendy Gramm, the former CFTC commissioner who, after shepherding through a regulatory exemption for Enron, resigned from the commission and joined the company's board of directors.
Enron's implosion last fall and winter was declared at the time to be a watershed event, a Teapot Dome-like scandal that would lead to new legislation, increased oversight and greater degrees of financial transparency. Enron, the argument went, would be the spark that set ablaze a fire of reform.
If anything, the wave of corporate accounting scandals that dominated the business headlines all spring might have been expected to give even more fuel to the forces of reform. On June 23, Treasury Secretary Paul O'Neill declared that he and the Bush administration were "outraged" at the current rash of corporate malfeasance.
But little has actually changed, and the backgrounds of the new nominees to the CFTC -- along with Congress' rejection, earlier this spring, of a bill aiming to give the CFTC more responsibility for regulating energy traders -- put the lie to O'Neill's rhetoric. More than six months after Enron declared bankruptcy, the regulatory landscape is largely the same as it was before Enron's problems became public. In fact, says Michael Greenberger, a law professor at the University of Maryland and the former director of trading and markets at the CFTC, "It's not changed at all."
"The mantra for not regulating is that these are isolated events," says Greenberger. "But when you look across the spectrum, how can it be an isolated event with Enron, with Tyco, Arthur Andersen, Global Crossing, Adelphia, ImClone and all the others? What's needed is a very dramatic reversal, almost to the kind Bush made with the Office of Homeland Security. And except for an accounting measure getting out of the Senate banking committee [which would create an independent board to oversee the industry], everything strong has failed."
