Posted on July 15, 2002 in Washington Watch
In the wake of the near collapse of yet another corporate gain, the Bush Administration finds itself in an extraordinarily difficult bind. When executives at WorldCom, like Enron before it, admitted to financial misreporting, shares in the company plummeted sending a shock throughout the U.S. business community.
There have been a number of similar scandals in the past few months resulting in tens of thousands losing their jobs. The impact on the stock market has been substantial with hundreds of thousands of Americans seeing their investment and retirement funds drained or even depleted. Many Americans are demanding answers and justice.
What has made this situation even more dramatic for the White House are two additional and potentially embarrassing stories of possible financial irregularities involving the President and Vice President Cheney.
Just this week new stories have appeared raising questions about a 1990 sale of stocks by then private businessman George W. Bush. Only eight days after Bush sold $850,000 in shares of Harken Energy the company issued a bad financial report causing their shares to drop significantly. As a result some have questioned whether Bush, who served as a director of the company had prior knowledge of this situation and was, therefore, involved in “insider trading.” The story become more complex because it now appears that Bush initially purchased some of the stock with a loan he received from the company at a favorable rate and because he was late in filing some of the required documents regarding the sale.
Also this week, a right wing “watch dog” group, Judicial Watch, filed a law suit against Vice President Cheney and the oil company he headed before becoming President Bush’s running mate. Judicial Watch, a long-time nemesis of President Clinton, has charged that the Vice President’s company, Halliburton, engaged in “a massive scheme to mislead and defraud [its] shareholders, potential investors and the securities market” by presenting misleading information about “its true financial situation and the values of its securities.”
Evidence of how difficult this situation might become for the White House became clear this week during an impromptu Bush press conference and in the public’s response to a major address delivered by Bush on the theme of “corporate responsibility.”
When the White House first called its July 8 surprise press event for the President, it was initially intended to pressure the Congress to pass legislation designed to create the President’s Homeland Security Cabinet post. But reporters would not be deterred from focusing on the WorldCom collapse and Bush’s own financial dealings as a Harken director. Fully two-thirds of the questions asked of the President (22 of 33) focussed on these matters. Put on the defensive and unable to move the discussion back to his own agenda, at one point the President became noticeably irritated.
The next day, Bush sought to take charge of the issue by delivering a major address on corporate responsibility before an invited group of 600 Wall Street and corporate executives. In his remarks Bush challenged the business community to operate according to a higher standard of ethics. He proposed tough new penalties for corporate fraud and pledged more money for government oversight groups that investigate such dealings. But both the press and political response to the President’s speech was much less than the White House had hoped it would be. Said one prominent financial commentator “The President, according to those people we talked with on Wall Street today, needed to say more and needed to say it more forcefully.” One Republican commentator observed, “I give the President credit for stepping up to the plate and talking about it, but when you dig beneath it and look for specifics, it was a disappointment.”
More damning than the analysts was the fact that on the day the President delivered his remarks designed to restore investor confidence, the stock market fell almost 300 points.
Democrats appear to believe that this issue of corporate responsibility and questions that have arisen out of the Administration’s own business dealings may enhance their electoral chance in the November 2002 election. They are resolved to press hard on this issue. While the White House maintains that Bush’s dealings with Harken are “an old story” and that he has been also been cleared of any wrongdoing in the matter, Democrats have called on the President to provide more complete answers to questions that have come up regarding his 1990 stock sale. And they have insisted that the Securities and Exchange Commission (SEC), the agency that investigated the sale, release all of its files for public scrutiny. They have also called on the President to remove from office the individual he appointed to head the SEC. Democrats argue that since that individual was tied to many of the accounting firms that have been implicated in the recent scandals, he can not be expected to provide oversight in investigating their behavior.
It is still too early to judge whether or not the Administration will be weakened or tarnished by any of these matters. Recent polls show a confusing picture. Public support for the President is still a high 70 percent, although approval of his handling of the economy has fallen to a low 58 percent. Eighty percent are worried about corporate wrongdoing, but a very small number hold Bush responsible. Still more than three-fourth’s of the public find that President Bush is an honest man. But about 60 percent believe that his Republican Party and the Administration are too closely tied to the interests of big business.
One Republican political analyst commenting on the President’s situation observed, “I think that the President’s popularity right now is held up entirely by the war on terrorism and by a general feeling that he’s honest. His speech has been rejected by the market, which I think is dangerous, because he’s played his hand and come up short.”
There was a time when the fate of the stock market was the concern of a small number of Americans. This is no longer the case. With millions of American workers and their families having their pension plans invested in the market, its continued decline spells financial ruin. So that even while the overall economy shows some sign of rebounding, with the stock market in decline and with this decline due to clear evidence of corporate greed and mismanagement, the party in power in Washington may be held responsible. The continued decline in the stock market also puts at risk a favorite Republican program–their desire to “privatize” the United States’ Social Security retirement fund.
These are clearly messages the Democrats intend to drive home in November. Said one party operative “This is an issue that works…we’re going to use it.”
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