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The issue exploded on Washington last Thursday after it was revealed that Enron executives had contacted several federal officials as their company ran out of cash. This, combined with Enron's generous contributions to President Bush and others in his administration, threatened to engulf the White House. But when it turned out that nobody seems to have done anything on Enron's behalf in response to the calls, and that one of the last callers was Democratic economic guru Robert Rubin, the Democrats didn't quite know what to do. Sen. Joseph Biden (D-Del.) declared on Meet the Press that there'd be hell to pay if the Bushies intervened, while Rep. Henry Waxman (D-Calif.) indicated in a letter that the scandal was that the Bushies didn't do anything.
The scandal also has an energy-policy angle, one that predates Enron's financial collapse. It seems that Vice President Richard Cheney's energy task force met with industry executives while drafting the administration's energy policy. The real scandal is that we have an "energy policy," as opposed to keeping federal planners away from the marketplace. But Waxman is upset that the meetings weren't open to the public, or at least recorded for the public, and he and Rep. John Dingell (D-Mich.) have been trying to get Cheney to come clean for months. Cheney's office has admitted that the energy policy staff met with Enron officials six times. It denies ever talking about Enron's finances, and advised Waxman that it hoped this information would "help you avoid the waste of time and taxpayer funds on unnecessary inquiries."
There are plenty of way the financial scandal could turn into a political one, and plenty of people are working hard to make that happen. Once congressional staffers start rummaging through documents and lawmakers start questioning key players, evidence of influence, either from Cheney's task force or from other officials, may very well turn up. Yesterday, for example, the White House disclosed that former Enron retainee and current Bush economic adviser Lawrence Lindsey directed a study of the likely effects of an Enron collapse in October. Who else did what? We learn more every day.
And Enron is not the only relevant player. Vinson & Elkins is an extremely political law firm that is no stranger to some in the administration. According to The Wall Street Journal, White House spokesman Dan Bartlett says he didn't know of any contacts between Vinson & Elkins attorneys and administration officials regarding Enron. "One thing is clear," Bartlett told the Journal. "This administration has taken no action to benefit or to attempt to help the Enron company."
The first statement has enough Clintonian holes in it to solve L.A.'s traffic congestion at rush hour. The second statement is cut and dried. If it turns out to be wrong, the scandal explodes.
Who Loses, Who Loses More
Enron investors, including many states and institutions, are of course big losers, perhaps in more ways than one. Employees are also in trouble: I wouldn't want to be dependent on a job at Andersen to make my rent. More of the obvious: Attorneys will make out like bandits, or perhaps like Enron senior executives a year before the crash.
Criminal investigations are underway, and they're less noisy but more deadly than the more numerous congressional investigations. At the height of California's energy crisis, state attorney general Bill Lockyer quipped, "I'd love to personally escort Lay to an 8-by-10 cell that he could share with a tattooed dude who says, 'Hi, my name is Spike, honey.'" He may have to satisfy himself with Lay sharing a cell with his buddies at Andersen.
The rest of us may lose in more subtle ways. The core of this scandal is fraud, which is to say human nature, and there's not much Congress can do about that. The accounting profession will certainly get tighter rules, either imposed by themselves or from new regulations. Meanwhile, legislators will push, perhaps with Bush's help, for more regulations on 401(k) plans, principally limiting the portion of plans that can contain company stock. This is a record-keeping nightmare and will upset employees of large companies, who typically are eager to invest in what they deem to be good deals. (Imagine if Microsoft employees were not allowed to purchase Microsoft stock.) So far there's been no talk of putting more regulation on the energy industry, but of course Waxman is in the minority and can't hold his own hearings. That too may change come November.