By HAROLD MEYERSON Special to the Washington Post
Published June 14, 2007
WASHINGTON - Monday was just a day like any other at our Justice Department. Attorney General Alberto Gonzales said he wasn't paying close attention to the fact that 53 senators had in essence voted that they had no confidence in him as the nation's chief law enforcer. At the same time, Solicitor General Paul Clement declined to file a friend-of-the-court brief on the side of the plaintiffs in a Supreme Court case that will determine whether Enron's shareholders can receive damages from the banks and brokerage houses that supplied the matches when Enron cooked its books.
In choosing not to file a brief, Clement turned down a request from the Securities and Exchange Commission to have the government intervene on shareholders' behalf. The SEC's petition had been something of a surprise, since its chairman, Christopher Cox, had generally shown more solicitude to the concerns of financial institutions than to those of litigious investors. But at the heart of the SEC's raison d'etre is the charge to protect investors from scams such as those of Enron and its enablers.
Even though the Bush White House has generally entrusted government agencies to officials devoted either to running those agencies into the ground or to negating those agencies' purposes, Cox and the SEC decided that weighing in on behalf of shareholders, at least this once, would be okay.
But the SEC wasn't the only government agency that Clement heard from. Treasury Secretary Henry Paulson sent Clement a letter recommending that the official policy of the government should be to butt out. "Treasury believes that uncertainty related to the primary liability for third parties could adversely affect domestic and international competitiveness of U.S. financial markets by posing unknown risks for entities that do a broad range of business with public companies, " Treasury spokeswoman Jennifer Zuccarelli said.
In other words, Treasury argued, since capital is mobile, shareholder protections in the United States cannot be any stricter than those in Albania and the Cayman Islands, lest we lose our business edge. The specter of capital flowing out of the United States has been an obsession of Paulson's since he arrived at Treasury. He's argued that the obligations that the Sarbanes-Oxley Act imposed on CEOs - having to vouch for the accuracy of their companies' financial statements, that sort of thing - would cause capital to seek friendlier climes. The fact that U.S. financial markets are swimming in capital has not deterred him.
Just in case Paulson didn't pack enough oomph, still one more prominent figure came forward to give Clement his two cents: President Bush. According to Al Hubbard, the president's national economic adviser, "the president believes that it's important to make certain that we reduce the unnecessary lawsuits, because that's a very big burden to the economy which adversely impacts investors."
In the cause of not adversely impacting investors, the president decided to keep the government from helping investors recover the savings and retirement nest eggs they lost in the biggest swindle of modern times.
Back, now, to Justice, where the message from the president probably caught Clement's eye. He filed no brief, and when the Supreme Court takes up cases dealing with bank liability this fall, the government will not be there arguing for swindled investors. Donald Rumsfeld's immortal words have now become official policy, at least in regard to investors: Stuff happens.
But only to the schnooks. From the viewpoint of the powerful, the system worked perfectly. The SEC did its job, Treasury weighed in, the president dropped a hint, Justice stayed out, Wall Street prevailed.
Is America a great country or what?
Harold Meyerson is editor-at-large of American Prospect and the L.A. Weekly.