Threatened by Congress

WASHINGTON -- As President Bush prepared last week to go to Wall Street and lecture corporate corrupters, a prudent financial adviser for major industrial firms e-mailed a warning to his network of associates around the country: the sleeping giant of Congress has been awakened, and that is reason for the economy to shudder.

"A witch hunt by Congress may be unstoppable at this point," the e-mail warned, adding that the Bush administration "now appears ready to join this 'inquisition' by holding executives criminally liable for false disclosure." The result, he said, is contributing to a deepening liquidity crisis. This adviser (who asked that his name not be used) told me of a potential double-dip recession ahead and even used the d-word -- "depression" -- as a possibility.

While the federal government is frustrating when it treats economic problems with nonchalance, it is terrifying when it gets involved. The failure of President Bush's New York speech to calm markets provoked a feeding frenzy in Congress. The government seldom makes the right response to economic crisis, and the horrible example came in the 1920s when the executive and legislative branches collaborated to help turn the stock market crash into the Great Depression. The question is whether George W. Bush, so loath to exercise the veto, will stop a criminalization of business that is ravaging stock prices.

The problem is politics. Democrats, who have been brooding about fading 2002 election prospects, see their great opportunity in tying corporate corruption to Bush and the Republicans. Agreeing, Republican senators, chatting in their cloakroom last week, mourned their opportunity to regain control slipping away. Thus, the two parties engaged in a competition for who could come across as most hostile to business.

A relatively harmless manifestation was the comic opera session Tuesday by the House Financial Services Committee, when witnesses who agreed to testify were interrupted by legislators such as Rep. Maxine Waters of California, interested only in hearing themselves. Since two former WorldCom executives were invoking the Fifth Amendment, Chairman Michael Oxley was ready to let them leave in disgrace rather than waste the committee's time. But members could not resist the opportunity to badger millionaire businessmen unable to reply.

Many Republicans and Democrats wanted instantly to vote a contempt of Congress criminal citation against ex-WorldCom CEO Bernie Ebbers and perhaps incarcerate him. Republican Chairman Oxley got needed support from liberal Democratic Rep. Barney Frank, who patiently explained to his colleagues that they are supposed to be legislators, not prosecutors.

Actually, Congress is most frightening when it is legislating. On Tuesday, senators who usually cannot agree on the time of day were acting like a totalitarian state's parliament: 97 to 0 to punish securities fraud with 10 years imprisonment; 96 to 0 for longer prison sentences; 97 to 0 for tougher treatment of document shredding. It raises the specter of businessmen fearing a term in prison if their accountant makes a mistake. "In the environment we are in, virtually anything can pass," Republican Sen. Phil Gramm told reporters.

Nobody can keep up with the flood of legislation pouring out of both sides of the Capitol -- some of it threatening Article I of the Constitution prohibiting ex post facto legislation. "What companies now face is potential criminal liability for accounting errors that will only be discoverable when new final rules are adopted," said one private memorandum by a financial analyst.

Supply-side consultant Jude Wanniski, in a letter to clients last Thursday, said: "There is absolutely no doubt that the beating Wall Street is taking is the result of the frenzy in the U.S. Senate to make it a crime to do business in the United States." He sees the two big political parties competing "to see which can force more morality on the American businessman." What will the president do about it? Earlier, Wanniski asked: "Will GWB be the (Herbert) Hoover of his age?"

Bush is in a dreadful situation. He did not address corporate corruption until the market had gone into a free fall and now seems to have lost control of what's happening in Congress. Can he dare veto the criminalization of business? Does he dare sign it?

I don't think there is a person in the country who doesn't want to punish anyone who is guilty of fraud. I think the area of concern is that while the government has proven itself capable of making a mess of our economy for both noble and less than noble reasons, there is precious little evidence that they can effectively "do" something about the current rash of alleged wrongdoing.

The fact that both sides of the aisle are now screaming for more new regulation doesn't bode well for the economy. You say that there was "real money" lost (as opposed to the false kind) and willful wrongdoing on the part of executives. To date, I haven't seen any evidence that these actions can be linked directly to the executives in charge of these businesses. It seems to me that you've reached the conclusion that we should "hang em" and then give them a fair trial.

On the other hand, I've seen a great deal of evidence that congress is engaging in yet another witch hunt, driven by class envy, and supported by every self serving publicity hound inside the beltway.

Allowing our servants to follow a road like this will be a big mistake. To quote A.F. Hayek, "...the road we choose here may lead to a place very different than the one we intend."

As with most government involvement in business, it can lead only to poverty and despair.

By the way, your reference to "the working people" of America has a very stalinist sound to it don't you think?

Supply-side consultant Jude Wanniski, in a letter to clients last Thursday, said: "There is absolutely no doubt that the beating Wall Street is taking is the result of the frenzy in the U.S. Senate to make it a crime to do business in the United States."

Foreign capital is exiting the stock markets too. Here's another example of how the government harms the economy via it's monopoly on force.

"...It gets even worse. Because of the IRS implementation, earlier this year, of "Qualified Intermediary" (QI) Regulations, privacy concerned foreign billionaires (and millionaires), who have until recently been responsible for large amounts of foreign investment in the United States, are now moving their investments to more "private" jurisdictions, as well. The reason is simple. The QI Regulations require foreign financial institutions who invest client money in the United States to reveal the true identity of individual investors or lose the right to serve as a "Qualified Intermediary" for US investments. Those billionaires (and millionaires) who want to preserve their privacy are just directing those financial institutions to invest their money elsewhere...."
http://www.actionamerica.org/taxecon/privfactor.html

He sees the two big political parties competing "to see which can force more morality on the American businessman."

The government is the all time champion of cooking the books and it has the gall to point fingers at the whole business community because of a few bad apples. The entire business community and employees that support it should stand tall against a government feigning to protect the little guy from organizations that cook their books.

If there was ever a prime example of the fox guarding the hen house it is the government claiming to protect the little guy from organizations that cook their books. President Bush will have to militarily smash down terrorism. For that is his job. It's not the President's, congress or' the government's job to manipulate the economy.

The business community with their employees will have to stand tall against the PC-status-quo fox -- self-proclaimed authorities claiming/feigning they'll use the government to protect the little guy and a complicit media and academia that supports them; for they are all the fox -- to regain their rightful place as the champions of honest business that has always increased the well-being of people.

The government, having already manipulated the economy to almost no-end, President Bush can play the unbeatable five-ace hand of replacing the initiation-of-force IRS and graduated income tax with a don't-pay-the-tax-if-you-don't-want-to consumption tax. For example, implement the proposed national retail sales tax (NRST). Not only would that win votes for Bush and republicans in congress it would boom the economy while fighting off a looming economic double-dip inflation/recession headed for depression.

Yes, the genie is out of the bottle. Where will it lead?

War of Two Worlds
Value Creators versus Value Destroyers

Politics is not the solution. It's the problem!

The first thing civilization must have is business/science. It's what the family needs so that its members can live creative, productive, happy lives. Business/science can survive, even thrive without government/bureaucracy.
Government/bureaucracy cannot survive without business/science. In general, business/science and family is the host and government/bureaucracy is a parasite.
Aside from that, keep valid government services that protect individual rights and property. Military defense, FBI, CIA, police and courts. With the rest of government striped away those few valid services would be several fold more efficient and effective than they are today.

Underwriters Laboratory is a private sector business that has to compete in a capitalist market. Underwriters laboratory is a good example of success where government fails.

Any government agency that is a value to the people and society -- which there are but a few -- could better serve the people by being in the private sector where competition demands maximum performance.

Wake up! They are the parasites. We are the host. We don't need them. They need us.

Let me tell you something about working people. We go to jail when we steal money. Corporate executives do not. They hide behind the shell of the fictitious person known as a corporation. They draw very large salaries because they supposedly know what the hell they are doing. Then, when their financials are proven nothing but smoke and mirrors, they act like they had no idea.

I am not a stalinist but I see the wealthy in America consistently sidestepping punishment for their crimes. That is the kind of double legal standard that causes revolutions.

I cheer those who make millions as investors or executives. America needs more millionaires because the rich invest capital and hire people. That wealth lifts all boats. I support the free enterprise system. I just want people to EARN their money not SWINDLE it. When they swindle it, I want them in prison.

A coporate CEO is the keeper of the purse and the captain of the ship. Either he knows what the hell his numbers are or he doesn't. If he knows his numbers and they are crooked, he is a crook. If he doesn't know his numbers, he is incompetent and should be fired.

Let me tell you something about working people. We go to jail when we steal money. Corporate executives do not.

I don't know which part I'm more impressed with, the lesson in class envy, or the introduction to the new "corporate executive" exemption from fraud prosecution law that has apparently been put on the books.

First of all, what makes you think you are in a position to tell me anything about "working people"? What exactly do you think I've been doing to the tune of 12 to 14 hours a day every day, for the last 18 years? Are you just envious because I may have more money than you? Well if that's true it would be because I know more about working not less.

Secondly, you throw out a class warfare argument, talk about revolution, and then claim that you're not a Stalinist. OK, fine. Then why do you support more government intervention in an issue that the government has shown time and again is beyond it's capability to understand? Personally I think your cover is blown comrade. You may not promote yourself as a socialist because it's not the kind of thing that's popular right now, but you have certainly adopted the socialist position. I wouldn't be at all surprised if your response includes a blurb about returning control of the "means of production" to the proletariat.

You have no evidence that corporate executives don't go to jail when convicted of a crime. But I guess we shouldn't let that stand in the way of social justice huh comrade? I mean, just because there hasn't been a conviction doesn't mean we cant have a hanging. (By the way, if we're metering out social justice I have a few guys who I'd like to include on the list. Not that they did anything wrong either, but they made a lot of money at a time when I made very little. So let's go get em. I'll hold their arms, and you can tie the knot around their neck.)

I guess I'm being a little harsh. I mean, someone who has been a FR member as long as you is probably not a DU disruptor. But if you're not, you are certainly playing into the hands of your enemies by demanding justice whether there has been a crime or not. You could be well intentioned, but if so, I think you need to take a good hard look at what it is you believe. The position you are taking on this issue is not one which leads to more freedom, it leads irrevocably to less. Let the government add restrictions to our lives in any way and we promote it from our servant, to our master.

And if your in favor of that, then maybe you would be more comfortable at the democratic underground.

In the meantime, I'd reccomend that you read "The Road to Serfdom" by FA Hayek. It was written in 1944 , but it is as timeless as the sun.

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