Thursday September 25, 2008, 11:17 pm
The Crisis Last Time
By RON SUSKIND

Washington

THE Federal Reserve chairman and senior economic officials of the Bush administration solemnly filed into the large conference room of the Treasury Department. There was a sense of urgency, an understanding that drastic action — restructuring the financial landscape of corporate America — was desperately needed.

Last week? Last night, as the president and his advisers prepared for his address to the nation? Hardly. It was Feb. 22, 2002. The officials were President Bush’s original economic team, including the Securities and Exchange Commission’s chairman, Harvey Pitt; Glenn Hubbard, the chairman of the Council of Economic Advisers; and the senior White House economic adviser, Lawrence Lindsey. The Federal Reserve chairman, of course, was Alan Greenspan.

The crisis of that moment was the implosion of Enron, Global Crossing and other companies. Along with conflicts of interest and criminally creative bookkeeping, the culprit was often a combination of financial complexity and insanely expensive compensation packages.

Enron is long gone, but this episode — as much a warning for our financial security as the 1993 World Trade Center bombing was to the threat of wider terrorism — carries some telling lessons as our best minds struggle now to save the economy.

The meeting, recounted to me by Paul O’Neill, Mr. Bush’s first Treasury secretary, and several other participants, was something of a showdown. Everyone came armed for battle, none more than Mr. Greenspan and Mr. O’Neill, who railed that day like a pair of blue-suited Jeremiahs. Their colloquy on economic policy and corporate practice, which began when they were senior officials in the Ford administration, had evolved over three decades.

To the surprise of many younger men in the room, the duo opened by reminiscing about a bygone era when the value of a company’s stock was assessed by how strong a dividend was paid. It was a standard that demanded tough, tangible choices. Everything, of course, came out of the same pot of cash, from executive compensation and capital improvements to the dividend — which could be spent by a shareholder or reinvested in more company stock as a show of support.

In contrast to dividends, Mr. Greenspan intoned, “Earnings are a very dubious measure” of corporate health. “Asset values are, after all, just based on a forecast,” he said, and a chief executive can “craft” an earnings statement in misleading ways.

Speaking with a hard-edged frankness rarely heard in public — and seeing that those assembled were not sharing his outrage — Mr. Greenspan slapped the table. “There’s been too much gaming of the system,” he thundered. “Capitalism is not working! There’s been a corrupting of the system of capitalism.”

Mr. O’Neill, for his part, pushed to alter the threshold for action against chief executives from “recklessness” — where a difficult finding of willful malfeasance would be necessary for action against a corporate chief — to negligence. That is, if a company went south, the boss could face a hard-eyed appraisal from government auditors and be subject to heavy fines and other penalties. By matching upside rewards with downside consequences — a bracing idea for the corner office — Messrs. O’Neill and Greenspan hoped fear would compel the titans of business to enforce financial discipline, full public disclosure and probity down the corporate ranks.

But they were in the minority. Mr. Pitt, the S.E.C. chairman, voiced concern that creation of a new entity to assess negligence by corporate honchos might draw power away from his agency. Lawrence Lindsey said, “There’s always the option of doing nothing,” that the markets are “already discounting the stocks in companies that show accounting irregularities.”

An article about the meeting appeared a few days later in The Wall Street Journal. The next day, Mr. O’Neill was in Florida addressing chief executives of America’s top 20 financial services companies. They piled on. One told the Treasury secretary that he’d “rather resign” than be held accountable for “what’s going on in my company.” A phalanx of outraged financial industry chiefs, many of them large Republican contributors, called the White House. Real reform was a political dead letter.

A presidential speech that followed was toothless, mostly recommending that chief executives personally certify their companies’ financial statements. Earnings per share remained the gold standard. The Sarbanes-Oxley bill, signed into law a few months later, largely focused on the auditors, and actually increased the complexity of reporting practices. As for lawsuits? Not to worry. No significant rise.

At issue, of course, were those twins, transparency and accountability. The years since have shown that the first one is meaningless without the second. With a world financial crisis upon us, the president and his economic team are forced again to talk about accountability. Let’s hope this time they mean it.

Ron Suskind is the author of “The Price of Loyalty: George W. Bush, the White House and the Education of Paul O’Neill” and “The Way of the World: A Story of Truth and Hope in an Age of Extremism.”

Thursday September 25, 2008, 11:18 pm
Politics in the Zeros: Spread the meme. Republicans are the party that wrecked America. John McCain’s long history with bank failures and financial scandals makes him uniquely ‘qualified’ to speak to the current crisis.

Thursday September 25, 2008, 11:19 pm
The next time a Republican friend says McCain is ready to Regulate the financial world... Refer them to ProgressiveAccounting.org for a really long list of all the DEREGULATION McCain has supported over the past 26 years to get us into this mess.

hen suggest a vote for Obama.

Friday September 26, 2008, 5:17 am
Mother Jones: Where Credit is Due: A Timeline of the Mortgage Crisis

A field guide to the loan sharks and politicos who got us into the predatory lending mess

Tuesday September 30, 2008, 8:39 pm
Call or e-mail Senator Obama. Tell him he does not need to be sitting there trying to help prop up Bush and Cheney and the mess they've made. Tell him we know he has the smarts to slow this thing down and figure out what's the best route to take. Tell him the rich have to pay for whatever help is offered. Use the leverage we have now to insist on a moratorium on home foreclosures, to insist on a move to universal health coverage, and tell him that we the people need to be in charge of the economic decisions that affect our lives, not the barons of Wall Street.

Call your Representative in Congress and your Senators. (click here to find their phone numbers). Tell them what you told Senator Obama.

You have to call them now and say "NO!" If we let them do this, just imagine how hard it will be to get anything good done when President Obama is in the White House. THESE DEMOCRATS ARE ONLY AS STRONG AS THE BACKBONE WE GIVE THEM. CALL CONGRESS NOW.