the CAMP ENRON Report

... gateway to the next Progressive Era?

Some say it's nothing but a train wreck ... roll in the big cranes, clear the track, see what the crew's been smoking. If I thought so, I'd not be writing this ... and if they thought so, they'd not be drumming so hard.

For a brief orientation, see this
Welcome to Camp Enron

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Camp Enron Archives
01/01/2002 - 02/01/2002 02/01/2002 - 03/01/2002 03/01/2002 - 04/01/2002 04/01/2002 - 05/01/2002 05/01/2002 - 06/01/2002 06/01/2002 - 07/01/2002 07/01/2002 - 08/01/2002 08/01/2002 - 09/01/2002 06/01/2003 - 07/01/2003

(2) All "major" articles of older material have now been imported, some with updates worth perusing. We'll keep it all on the main page for a while, will add a few loose pieces of history, will trim the main page and index the archives for convenience later.


free agent, loose cannon, pointy stick ... taking an imposing analytic toolkit out of the box, over the wall and into the street ... with callous disregard for accepted wisdom and standard English

reading the tea leaves from original angles, we've led with uncannily prescient takes on the federal surplus, the dotcom crash, the "Energy Crisis", the Afghan campaign, the federal deficit.

More where those came from ... stay tuned.

For brief orientation, see this
Welcome to CP

... gateway to the next Progressive Era?

For a brief orientation, see this
Welcome to Camp Enron

Many thanks to Tony Adragna and Will Vehrs, still shouting 'cross the Potomac at QuasiPundit. Early Camp Enron material can be found in QP's Dispatches department.
Monday, July 08, 2002

--- Business Takes the Lead, Uneasily, and to their Eventual Regret ---

Enronitis progresses from an initial phase of anemic public response to an irony-rich phase in which financial interests drive the reaction, and business advocacy organizations fall visibly out of synch with their clientele. (An earlier (pre-WorldCom) post addressed the tepid public response and the developing investor-class reaction).

Even before the WorldCom disclosures, Enron-consciousness was thriving amid the scarps and gullies of the world's financial watersheds, where an unabated flood of economic crosscurrents undercut the footings of once-secure corporate aeries. The investment community is most reluctant to acknowledge systemic vice, but paradoxically it has the most at stake. Dollars were getting up and walking out of the market.

A day before WorldCom, the GOP parroted talking point dictation direct from the Chamber of Commerce (among other organized advocacies), and CofC functionaries reflexively moved to block any move that would expand regulation or subject any member (or traditional ally) to an extra flyspeck of potential liability.

In time, with or without WorldCom, business interests wake up and remember their fundamental interests. Shields and cloaks reduce trust, trust lubricates exchange, and exchange creates value. A new conventional wisdom is starting to jell. In a healthy market, nothing gets socialized faster than the cost of fraud. Everybody pays, and the (shared) costs invariably exceed the (individual) ill-gotten gains.
Was Enron an isolated occurrence? No. Will natural market dynamics flush Enron toxins out of the system? No. Are we losing comparative advantage? Yes. Are we losing the initiative? Yes. Can we afford to go on like this? No.
The memo took a long time reaching K Street. (History leads us to believe it will never reach the WSJ editorial board room.) Temporarily, in a parody of the principle-agent problem, the engines of business advocacy are straining at cross-purposes against the firms that pay their rent. So now the plot thickens.

Ownership elites are miniscule in numbers, but massive in influence. Likewise management elites. The two elites overlap, their interests converge, but do not coincide. Enron exposes snags where related interests are in opposition. The business lobby is a powerful engine of influence, and it is built to serve both masters. In time they'll tease out right from wrong, profitable from profligate investment, and defensible from indefensible positions.

The time has come for capital to recognize and abandon a number of obviously indefensible positions. Once movement occurs, it gains momentum. The perception of motion creates an atmosphere conducive to motion. Then there's a spate of turnover in leadership as pragmatists gain stature and influence at the expense of diehards.

Now business rides to the rescue! An alarmed consensus is forming -- Something is wrong! Something must be done! Even among the hold-outs, an equally compelling consensus is forming -- The water's rising too fast! The dikes won't hold! Somebody has to take the fall!
Int'l Paper CEO John Dillon spoke for the Business Roundtable on ABC's This Week: "we can support the Sarbanes bill" ... (though he clearly hopes for a conference committee blend of that and Oxley's milder House bill.) "100% for disclosure". Roundtable's John Castellani likes everything in general and nothing in particular. "We support proposals for reform put forward by The President, Members of Congress and the leading stock exchanges" (per full-page ads in major papers). They do support shareholder approval of all option grants.

CNN's Lou Dobbs now explicitly rejects his earlier "few bad apples" thesis ... and seems to have jumped from the "few bad apples at Andersen" diagnosis to the sweeping corruption analysis "it was all of the Big FiveFour, not just Andersen".

Last I heard, NYSE chief Dick Grasso was holding to the premise of between 1 and 15 bad apples, but this assessment may be out of date.

AICPA applauds all reform efforts ... even though reform efforts contradict each other, even though AICPA went on record early against most of them, even though current proposed reforms still "may have gone too far". AICPA is afraid of losing turf ... as they should be ... as they should. They're part of the problem, not part of the solution. They never discipline anybody, they've lead the de-professionalization of their own profession ... but they are eager to "work with" whoever is fixing things. In K-Street-ese, "work with" means "be in the room to throw monkey wrenches".

The Conference Board has a Blue-Ribbon Commission on Public Trust and Private Enterprise, fronted by Pete Peterson, w/ Andy Grove, Levitt, Rudman, Volcker.

Anti-plaintiff "tort reform" shill Philip Howard of Common Good demands "accountability" ... but not regulation. How do we usually enforce accountability? Mostly, we take people to court.

In a surprise press briefing today President Bush promised "tough new laws". That's a long Texas mile from the "no new laws" he endorsed earlier in the drama. In earlier Enron commentary, Treasury Sec. Paul O'Neill didn't "see the need for lots of new laws" ... but did see the need for a new framework for regulating the audit function. Now Bush wants to be in the room ... he wants to "work with" Sarbanes.

US Chamber of Commerce's Thomas Donohue lays it on the line, bringing their considerable forces out from behind the usual stonewall for a battle they never thought they'd have to fight. He vows to "hit the airwaves" ... that's K-Street-ese for "our vital interests are threatened, and we're going to war". He "deplores the episodes", says we "need an honest discussion" but must "resist the temptation" to cripple the world's best economy by overreacting since "capable infrastructure ... is already in place". [Earth to Major Tom -- the temptations that are crippling capital flows have nothing to do with the temptation to make law.] He'll support innocuous measures like an SEC budget boost and a bar against executive stock sales during 401k lockdowns, would approve yanking derelict exec's/directors (providing they have their day in court). He also would support (rather frisky by CofC standards) requiring a majority of independent directors, and an all-indy audit committee. He likes Pitt's oversight board, hates Sarbanes' board (concerned its transparency will favor trial lawyers). Again, the "day in court" is vital for corporate defendants (but apparently not for shareholder plaintiffs). Major concern: information unearthed by oversight boards will find its way into court, inviting the class action trial lawyers / plaintiff's bar to subject American industry to "summary execution". [If the Sarbanes bill becomes law, the terrorists will have won.] CofC will challenge foreign critics (Osama?), sponsor extended dialog on long-term issues (talk it to death and hope it blows over). Short selling is a major target (CofC goes on record against efficient markets!). He specifically opposes expensing stock options, suggesting we've had "one or two" cases of abuse, and it's no longer a problem. lawmaking is a bad thing, rulemaking is a good thing ("we want to be in the middle of that"). Of course they do.
Donohue is a relentless lobbybot, responding as programmed. He may receive more awkward mid-course corrections from the folks who recharge his batteries, as layers of the upper crust delaminate. Serious money is getting down off its high horse, getting its hands dirty, shedding baggage, trying to rock the juggernaut of American capitalism out of the righthand gutter.

Once the bandwagon gets rolling, though, more bystanders of all stations will want to push, and take credit, and steer. Interests vital to economic elites will come unexpectedly within the scope of discourse, and negotiation, and the alignment of interests between elites and masses will be re-examined. There will be a movement, and none may govern it, and it may rumble on unpredictably until it finds the lefthand gutter.

Patience. However this season's schedule plays out, it's a rebuilding year for the reform team. Legislation may pass. It won't go to the heart of the matter -- whatever that is. It won't be polished and precision-tuned. It will be a hastily-concocted compromise of competing half-measures, and hindsight will probably show most of those to be misguided. But an epoch of change is underway.