Blue Dogs and Greenbacks
Reprinted from TomPaine.com-It’s worth your time….this is why the Dem’s are fast becoming my former party.
November 15, 2007
An attorney in Los Angeles, Al Meyerhoff is co-counsel for the class in the Enron shareholder litigation.
Perhaps Ralph Nader was right.
The leadership of the Democratic party recently had the rare opportunity to significantly recast the Securities and Exchange Commission (SEC). It was a highly watched choice in certain quarters—and in many boardrooms. Which Democrats would show up? Those favoring broad and systemic reform of our nation’s markets? Or “Blue Dog” business Democrats, happy with shifting campaign contributions and seeming more like Republicans every day? Unfortunately for the country, it was the Blue Dogs by a mile.
Created as part of the New Deal, the SEC, with future Supreme Court Justice William O. Douglas as its Chairman, was the ultimate Depression era watchdog—safeguarding the public from the fraud and dishonesty that so characterized Wall Street in those sad times and in these times too. For the better part of 70 years, the Commission did its job, but as markets changed and expanded, the Commission’s powers often proved insufficient. Its role also lessened—especially during the roaring 90s, when deregulation reigned supreme. Happy to fill this regulatory gap, the fraudsters came out from under their collective rocks at Enron, Tyco, WorldCom, HealthSouth and elsewhere.
Then, of course, the cows came home. The market collapsed. Americans of every economic stripe – from small investors to multi-billion dollar institutional investors—lost hundreds of billions of dollars—their pensions, their life savings, their homes, their faith in the financial system. Confidence in the integrity of U.S. markets was rocked worldwide. Suddenly everyone—the Congress, the pundits, the investors, the bankers—were all asking the same question. How could our institutions fail us this badly? Where was the SEC? Asleep at the switch, that’s where—an afterthought—understaffed, underfunded, out-gunned and by now often too cozy with The Street it was supposed to regulate.
Some of the harshest SEC critics were, of course, Democrats. The criticism was a tad muted, however; some of their own, like Clintonista Robert Rubin (now head of Citibank), had lobbied the Bush Administration on Enron’s behalf.
Slowly, we have crawled back. Congress enacted Sarbanes-Oxley almost unanimously, signed with fanfare by born-again regulator George W. Bush. The Justice Department awoke—and the worst of the lot, Ken Lay and Jeffrey Skilling and Dennis Kozlowski and Bernie Ebbers and even poor Martha Stewart went off to prison. Class-action lawsuits brought record recoveries; at least some shareholders got some of their losses back. Even the financial media, for too long the cheerleader (some would say lap dog) of corporate America finally found its voice. It was morning in America.
But now the sun may be setting again. The reform balloon in Washington has burst. Clean up Wall Street? Have you seen those Democratic campaign coffers lately? Oversight hearings? Sure, but over how Sarbanes-Oxley is making American markets “uncompetitive” in our global economy.
Meanwhile, buffeted by the price of oil and the subprime mortgage meltdown, the market shifts, turns and bounces, more of a kangaroo than a bull or bear. And what clearer evidence could there be that markets don’t regulate themselves than this subprime mess? It’s the 20s all over again—mortgage brokers giving loans willy-nilly, banks turning them into bonds, some rated “AAA” based on next to nothing, them selling them to us—at a hefty fee.
The Democrats were faced with a dilemma in nominating candidates for these two SEC vacancies. Which breed to choose: pit bulls or cocker spaniels. Get tough or go for the green? Money barks.
Perhaps the two nominees eventually chosen, Luis Aguilar and Elisse Walter, will eventually grow into their jobs. But frankly, nothing in their background now will put the fear of God (or the SEC) in America’s corporate boardrooms. Neither has a lick of experience in acting on behalf of investors. Aguilar, who will replace Roel Campos, was general counsel at Invesco and has questioned the effectiveness of Sarbanes-Oxley. Walters has spent her career inside the Beltway as a regulator.
What the SEC needed was a shakeup, not on-the-job training. The Democratic nominees should have sent a strong, clear message that there is a new sheriff in town. The last Republican appointment, after all, former conservative Republican Congressman Chris Cox, is a card-carrying champion of deregulation. Who on the SEC speaks for investors? Who will argue that we cannot trust brokers, bankers and corporate executives to give us a fair deal, especially in markets like these? Isn’t that debate what democracy—and elections—are all about?
Consider just a few of the issues the reconfigured Commission will soon be called upon to decide:
* Will Sarbanes-Oxley (enacted in response to the excesses of the late 90s) be effectively implemented or instead rolled back to improve American market “competitiveness”?
* Will shareholders be provided greater ability to nominate members to corporate boards?
* Will the nation’s major emitters of greenhouse gases be required to disclose their potential liability for climate change?
In a very real sense, this choice of these two SEC nominees was actually a litmus test for the Democrats and about far more than the Commission. For the past seven years, our government has been of the corporation, for the corporation and by the corporation. In response to that pro-big business agenda—and corresponding K Street cronyism—the voters threw the rascals out. DeLay, gone. Armey, gone. Abramoff, gone. Pombo, gone. The new Democratic majority came into office with (to use an overused term) a mandate. Clean house. No more business as usual. We’re a democracy, not a plutocracy.
For the first months, the new Congress got the message. A fresh wind blew and real reforms happened—from the minimum wage to campaign finance reform. Now it seems that that wind is becoming a gentle breeze. Reforms impacting the rich and powerful, like taxing hedge funds or eliminating sugar subsidies, have come to a standstill. Those newly in power seem more concerned about keeping it than using it.
A year ago, many of us thought we took the country back from the robber barons. But Democrats are becoming Republicans before our eyes. The term for this is “Blue Dog.” But given the power of money in filling these two SEC jobs, perhaps we need a new term for these Democrats: Green Dogs. Pass the mustard.
I am tired of hearing we have no other choice. They(the Dems) know that about the progressives and we have to show them that we do have choices..they just aren’t going to like them.