The amount of history ignored is magnificent. Through high school, the loosely defined subject of social studies was often the least simple to glean information from, as teachers explained less the circumstances that led from one event to the next and more names and facts, minus the significance to modern life.
As we reach a crucial point in the country’s economic and political life, we seem to be looking forward to the future without reverence to our past.
Nowhere is this more obvious than in the current financial crisis.
A couple weeks ago, while doing research online for a paper on the Enron scandal, I ran across a "Daily Show" interview with Bethany McLean, then writer for Fortune Magazine, who wrote a skeptical article on Enron a year before their bankruptcy and a book on the ensuing fiasco.
In the interview, she discusses how the collapse of the dot-com bubble in 2000 and Enron have combined to give regular folks an idea that the financial markets are “a crazy casino” that many regular folks are losing faith in, if for no other reason than unfamiliarity with their inner workings.
The interview took place on Feb. 20, 2002. Nearly seven years later, we are in the same position.
Stock market crashes are not simple events. Many factors lead up to each one, and the current situation is no exception. However, we have chosen to ignore many guidelines and past events while evaluating this one. After all, the Sarbanes-Oxley Act of 2002 — the legislation that was passed in an effort to stifle the corrupt accounting practiced by Enron, Tyco, WorldCom and Adelphia, among others — was supposed to fix everything.
Besides taking precautions to ensure honest financial statements, the act also required executives to sign off on them, therefore holding them responsible for the company’s actions. The accountability factor was supposed to be an incentive against unethical, misleading or illegal practices like mark-to-market accounting, which allows companies (like Enron and many of the banks involved in this debacle) to book expected profits before they are actually received.
Unfortunately, the intentions of the act and the actions since taken are incongruous.
Now, instead of examining the conduct of each firm and their executives and deciding whether or not they deserved a little help, we heeded Treasury Secretary Henry Paulson’s death knell and began throwing money around in an attempt at market resuscitation.
The post-Enron regulations were a Berlin Wall against financial disaster when they were thought to be the Great Wall of China. Congress apparently forgot that when a barrier is put in place, companies find a way around (or through) it.
As far as we know, the recent financial collapse is not due to blatantly corrupt, illegal business activities as much as Enron’s was.
However, the notion of holding the guys at the top liable for conduct under their watch is no less relevant, and instead of bailing companies out when they make bad decisions, let’s treat them like poorly run entities and let them fail.
The act is just another facade of imposition that came down quickly.
Ryan can be reached by e-mail at rponeal@gmail.com.
