Taking a paddle to his pals

July 10, 2002|By Jules Witcover

WASHINGTON -- If President Bush's Wall Street mission was to take big business to the woodshed for corporate corruption and greed, the lashing he delivered was about what you might expect a reluctant father to dole out to a favorite son.

While lecturing the assembled corporate leaders on the need for a "new ethic of personal responsibility," the president essentially continued his argument that a few bad apples were spoiling the whole bushel.

That was to be expected from a Republican chief executive whose core political constituency was sitting before him. At the same time, it was clear from Mr. Bush's call for tougher criminal penalties against corporate abusers of the public trust that he knows he must convince average voters that he is on their side.

In calling on CEOs to issue annual reports providing the details of their own compensation packages, which often include huge stock options, Mr. Bush touched on an issue that grates particularly on small stockholders.

His announcement that a corporate fraud task force -- which he dubbed a "financial crimes SWAT team" -- is being created in the Justice Department, and that top corporate executives will face a doubling of jail time to 10 years for corporate fraud, does put new teeth in the administration's enforcement arm.

So does Mr. Bush's report that he will seek $100 million more to beef up the investigative forces of the Securities and Exchange Commission to uncover more scandals "hidden" in corporate America that need rooting out.

But continued criticism can be expected, especially from Democrats in Congress, of his decision to keep Harvey Pitt, a former lobbyist for the accounting business, as chairman of the SEC. Even Mr. Bush's old political nemesis, Republican Sen. John McCain, has called for Mr. Pitt's head, writing that "he has appeared slow and tepid in addressing accounting abuses."

Democrats, stymied politically by Mr. Bush's leadership of the war on terrorism, are eager to politicize the corporate greed issue, particularly in their resurrection of his own stock disposal problems before he was governor of Texas that were investigated by the SEC and later dropped. So the president did not miss the opportunity to suggest that the scandal didn't start on his watch.

The economic boom of the 1990s, he said, "spawned abuses and excesses" and "allowed the seeds of scandal to spring up" -- a way of reminding voters that President Bill Clinton was in charge during that time.

Mr. Bush's own special identification with corporate America as a former oil and energy company executive, however, and Vice President Dick Cheney's similar tie, ensure that the Democrats will continue to question their sincerity and diligence in bringing abusers of corporate power to heel.

The president also used the Wall Street speech to accuse the Democrats in control of the Senate of dragging their feet on corrective legislation, now that the Republican-controlled House has already passed its own version of dealing with accounting abuses. The Senate bill, though, sponsored by Democratic Sen. Paul Sarbanes of Maryland, has tougher provisions that Mr. Bush doesn't favor.

This president, who as a candidate championed deregulation, has been forced by the scandals of Enron, WorldCom and other business giants to acknowledge that government intervention is now imperative. Self-regulation is important, he said in his speech, but it's not enough now. With as many as 80 million Americans owning stock, consumer confidence in corporate America is critical to the nation's economy and, ultimately, to Mr. Bush's political future.

His father, the senior George Bush, lost the White House in 1992 largely because he seemed to neglect warnings of an economic downturn on which Mr. Clinton capitalized. So his son was obliged to go to Wall Street and administer some distasteful medicine to his old friends. If and how they take it may determine whether voters take his party to the woodshed in the congressional elections in November.

Jules Witcover writes from The Sun's Washington bureau. His column appears Mondays, Wednesdays and Fridays.

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