Exorcising Enron
The prospect of scandal.

By NR Editors
From the February 11, 2002, issue of National Review

he Enron debacle is the nation's most famous business failure not just because it happened suddenly, amid a thunderclap of revelations about misstated profits and possible criminality, but also because it offers the tantalizing prospect of a Bush scandal. So far the expectation has been unrealized, as the company's SOS calls to Washington were met with the proverbial "drop dead" from Bush officials. Although Democrats can't quite decide whether the scandal is that Bush officials gave Enron special favors or that they gave it this death-bed cold shoulder (or maybe a little of both, depending on the day), the Enron disaster will linger for months.

The administration had better get used to it. So far it has demonstrated the self-righteous defensiveness that often characterizes the Bush operation's dealings with the press. Two years ago, the Bush campaign refused to answer questions about any possible drug use in Bush's past. It argued that it wasn't going to play the scandal game — and it weathered the media storm just fine, but took a hit in the campaign's final days when Bush's never-disclosed DUI arrest surfaced. The approach of the Bush White House now is almost exactly parallel, with the difference that Enron is inarguably an appropriate matter of public scrutiny.

The administration is not resisting congressional investigators solely because of its stiff neck. It has a legitimate interest in preserving its right to keep some of its internal deliberations secret. But the best way to do so may be to reveal as much information as possible while continuing to deny any legal obligation to do so. In particular, the administration should disclose information about the Cheney energy task force and about Enron contacts with administration officials. The administration appears to be beyond reproach in this matter. It should do itself the favor of acting like it.

For conservatives, Bush's political interest in the Enron scandal should be secondary to resisting the inevitable rush of foolish regulations. Enron's collapse is, as the Bush administration says, a triumph of capitalism, in the sense that only in the free-market system is such a mismanaged but politically connected firm allowed to fail. But a functioning market also depends on a level of transparency that was absent in the case of Enron. Accounting and securities rules should be reviewed, while keeping in mind that a huge net of regulations already enmeshes companies like Enron. No government rule could have saved Enron from its own fundamental folly: making the wrong bets in the energy and tech markets.

Liberals are nonetheless arguing that new regulations are necessary for 401(k)s, limiting how much company stock a employee can hold (never mind that one sponsor of this legislation, Sen. Jon Corzine, became a multi-millionaire by investing heavily in Goldman Sachs stock when he worked there) and discouraging companies from giving their employees stock. This plan, as Richard Nadler points out in this issue, is a gratuitous shot at the 401(k)s that have made it possible for workers to save and invest for their retirement without relying wholly on their employers or the government. Most employees already understand the importance of diversifying their portfolio, and the Enron controversy will only reemphasize the point.

There will be attempts to roll back the partial deregulation of electricity that occurred at the state level during the Clinton years, even though it has been successful at delivering cheaper energy. The campaign-finance system will come under renewed assault, although all of Enron's spending seems to have gotten it nothing untoward. (Sometimes it prevailed in Washington, sometimes not, generally depending on the ideological preferences of policymakers.) Finally, since Enron avoided paying federal taxes in recent years, there will be a renewed push to pile on new corporate taxes, although it should now be clear that thriving, profitable businesses are good for the little guy. It's corporations that go out of business that create aggrieved former employees and shareholders.

If the administration provides full disclosure, criticizes and prosecutes any lawbreaking that has occurred, and stands for carefully designed reform where necessary, neither partisan nor ideological opportunists will be able to feast on Enron's carcass.