America Robbed Blind

Every Monday I get a memo from Roy H. Williams.  It is consistently filled with interesting observations about the world we live in and specifically focuses on marketing and business practices.  Williams’ company is called the Wizard Academy.

In 2005, Wizard Academy Press published a book by Greg Farrell called America Robbed Blind.  At the time, Farrell was a reporter for USA Today.  He reported primarily on Wall Street and the Securities and Exchange Commission.  Today Farrell writes for Financial Times.  Farrell has won the Jesse Neal Award for investigative reporting and is a graduate of Harvard University.  He completed an MBA at Columbia University.

Williams made the following comments in today’s memo.  This is very interesting, in light of what is happening right now in Washington, D.C. and Wall Street.

“Greg was America’s only reporter in the courtroom for every minute of the trials of Enron, Worldcom, Tyco and Martha Stewart. As an investigative reporter Greg dug deep, full time, year after year. “Roy, the SEC is being set up to take the fall for a series of financial disasters,” he said. “This whole Enron thing is just the tip of the iceberg.”

“What do you mean?”

“The number of publicly traded companies has grown exponentially in recent years, yet the budget for the SEC had been increased by only a small amount. Think of it this way,” Greg said, "Andy and Barney did a pretty good job patrolling Mayberry, but now they’re being told they have to patrol Los Angeles without any additional help, and without any bullets for their guns.”

Greg went on to explain how Congress keeps the SEC under-funded so that big business can grow unimpeded, unsupervised, and unregulated. If Congress allowed the SEC to do its job, big business would cry, “The government has us handcuffed! We can’t compete with all these government regulations.”

Big companies donate big dollars to congressional candidates. Are you beginning to get the picture?

Page 68 of Greg’s book details the proposal made during the summer of 2000 by Arthur Levitt, chairman of the SEC at the time.

Levitt was absolutely convinced that a financial catastrophe was coming and begged Congress to give him the power to stop it.

“But several big firms whose campaign contributions to lawmakers on Capitol Hill gave them enormous clout, fought the proposal aggressively… Levitt went to extraordinary lengths to show Congress the dangers that lay ahead… But Levitt’s warnings fell on deaf ears. So he took the battle to the states… It was only in November of 2000, when he learned that Congress was threatening to cut the SEC’s budget if the new rule went into effect, that Levitt relented.” - Page 69, America Robbed Blind, (2005)

In essence, Congress told Andy to quit complaining or they would take away his budget to pay Barney.

When the whole Enron thing was over, I asked Greg if he thought anything like that could ever happen again. “You can count on it,” he said, “It’s inevitable. As long as Congress keeps the watchdog starved, muzzled and on a chain, the abuses will multiply. Arthur Levitt begged Congress to empower the SEC and they spanked him for it.”

Enron and his cousins robbed American investors of more than 500 billion dollars. Then on September 18, 2008, after it was learned that Americans would again be left holding the bag for a 700 billion-dollar bank heist, John McCain, a lawmaker on Capitol Hill for the past 26 years, said, “The chairman of the SEC serves at the appointment of the president and in my view, has betrayed the public’s trust. If I were president today, I would fire him.’’

Wow. They’re trying to hang this debacle around the neck of the SEC and use them as the scapegoat, just as Greg said they would. (Hey, if Obama had said it, I’d be equally appalled, so don’t make the mistake of thinking I have a political bias. I don’t.)

Perhaps the greatest tragedy of all is that Greg described exactly how to fix the problem in his book (pages 180-181,) but no one paid attention:

1.    Allow the SEC to keep the fees it currently collects from public companies. Self-funding would protect the financial health of the commission from the whims of its Congressional overlords, and allow the SEC to grow at the same rate as the financial markets it polices.

2. Give SEC attorney’s criminal enforcement powers.

3. Give bonuses to successful SEC attorneys. Plaintiff’s lawyers who bring cases against tobacco companies and asbestos manufacturers put years of effort into the cause because if they win, the financial payoff is astronomical. But an SEC lawyer has almost no incentive to take on difficult cases where the commission is outgunned by a public company’s army of lawyers.”

OK, so back to me, a guy trying to run a youth ministry organization that is getting impacted by the events unfolding.  When the economy suffers – our donations are effected; prices go up – food costs, insurance, etc.  In my 34 years at Youthfront we have seen several of these types of cycles before.  They have been challenging; sometimes helping to redefine who we are and what we do in positive ways.   This reality doesn’t make this season any easier especially since the scope of this current economic crisis has such huge and global ramifications.

The scripture says, “Greedy people try to get rich quick but don’t realize they’re headed for poverty (Proverbs 28:22, NLT).”  It seems to me that a significant part of this bailout effort is focused on trying to protect those who have been greedy.  I read about a man yesterday who made $250,000 a year and bought a home worth $2.7 million.  He lost his job and is now facing foreclosure hoping this bailout will help him.  You’ve got to be kidding.  When you buy a home that is worth $2.2 million more than you can afford you should have your head examined and shame on a system that will allow someone to do that.  OK, I’ve ranted enough.  Got any thoughts?

Comments

[ray]

mike, you know i was raised by survivors of the great depression. i heard this same message a thousand times over. in the 70's when we officially left all hope behind of ever correcting fdr's move away from a commodity-based monetary standard my dad made sure we understood how to survive what he believed would soon come about. (and you wonder why i am so conservative) watching and listening to the news these past two weeks have been some serious deja vu. be encouraged -- these things, hard as they are, have (eventually) an upside.

[Steven]

I think I have the same leanings as the last person to post. This is a huge lesson on as your next posts touches on, America living in excess, and not living generously. This is not about just corporate greed and I think people are getting that twisted. This is about greed and entitlement accross the board. It is no more ridiculous for a person who makes $250,000 dollars to buy a $2.5 millions house then it is for a middle-class person making $45,000 to have nearly $200,000 in debt with cars, a house, credit cards etc....This is another "epidemic" that is caused when people think they deserve to live a way that took their grandparents a whole life time to work towrards. The finger pointing has to stop.
This I believe has also been a great oppurtunity to watch thousands of citizens call the people who represent them in Washington outraged that this is all playing out the way it is. Finally, I would like to comment on the "solutions" to this crisis.

[Mike]

We have not passed on the economic concept of "deferred gratification" to the younger generations.

[Adam]

I've heard a lot of things that are similar to that article. I believe a lot of them and agree with most of them, but there's still the question "what do we do now?" The system is corrupt and it's structured in such a way that you're forced to rely on the system to fix the system (ie change only comes from presidential elections).

Our "forefathers" solution was to start a war and overthrow the people causing the problems, but I don't think those who read this blog see that as a viable solution.