Sometimes you're damned if you do and damned if you don't -- especially if there's partisan advantage in it. That seems to be the case with the recent controversy involving the Enron Corporation and the Bush administration. It seems Enron executives, hoping for some help, called folks in the Bush administration last fall when signs of the company's financial crisis were becoming clearer to insiders. The Bush appointees listened, checked with their lawyers and did nothing -- which is exactly what they should have done. Now some Democrats want to turn the administration's inaction into a federal case.
Rep. Henry Waxman (D-Calif.) accused Bush officials of having "done nothing to mitigate the harm of the Enron bankruptcy to thousands of its employees and shareholders," a charge that simply doesn't hold water. What if, last fall, Bush appointees at the Treasury Department had heeded the pleas for help on Enron's behalf made by former Clinton Treasury Secretary Robert Rubin, who is now chairman of Citigroup, one of Enron's chief creditors?
Rubin called Peter Fisher, the undersecretary for domestic finance, and asked what he thought of the idea of calling bond-rating agencies to try to head off a bad credit rating, according to news reports. Enron's president, Greg Whalley, also called Fisher to ask him if he would call Enron's lenders while they were deciding whether to extend more credit to the cash-strapped firm. Now, there's nothing particularly surprising about Rubin or Whalley making these requests -- they were trying to save the company. But if the Bush administration had intervened, the same Democrats who are complaining now would have screamed even louder.
There's no doubt that Enron investors are suffering in the wake of the company's bankruptcy in early December -- the largest bankruptcy in U.S. history -- especially those Enron employees who not only lost their jobs but their life savings. As an Enron investor myself -- I bought shares for my individual pension account at $65.30 per share, which are now worth 67 cents apiece -- I'm not happy about the accounting practices that helped fuel this debacle.
But I am also less willing to jump to conclusions about who's to blame, perhaps because I've sat on two publicly traded companies' boards of directors, including on the audit committee of one. I know how complicated these issues can be -- and how much outside directors rely on the good faith of company managers, and the professionalism and integrity of accounting firms. It's important that an impartial investigation get to the bottom of who knew what, when and whether those inside the company illegally tried to hide matters that are required by law to be publicly disclosed.
It may also be a good idea to examine whether the rather common practice of companies making pension contributions for their employees in the form of company stock is a good idea. The practice began as a way of letting employees both share and have a stake in the company's profits. But, as with any investment in stocks, there is always a downside risk.
Enron made about half its contributions to employees' 401(k) pension plans in company stock, which is now almost worthless. Worse, Enron employees say they were prevented from selling their company stock late last year while the stock was plummeting because Enron had changed pension plan administrators. It may have been just a case of bad timing, but Enron's move looks particularly bad since some company executives were cashing in their stock options for huge profits at about the same time.
The Bush administration announced last week that it will look at the whole issue of company pension plans that rely heavily on contributions made up of company stock. But again, the issue isn't as simple as it seems. When times are good, employees are happy to own company stock in their pension portfolios, and any attempt to limit them might actually make them worse off. The real issue ought to be who makes the decision as to what stocks to invest in and should employees -- barring those with access to insider information that could affect stock prices -- be allowed to sell their shares just as other investors may.
Democrats on the Hill would be better off concentrating on these important public policy issues than pointing fingers at the Bush administration.