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Obama- Corzine > Bush-Lay

To highlight the differences between nice-guy Republicans and tough-guy Democrats, take a look at Exhibit A, the differing treatments by the press and pols of Ken Lay versus John Corzine.

Ken Lay, you may recall, was the CEO of Enron, originally a Texas pipeline company and later principally a producer of arcane financial products whose function was to hide the stupid investments of Enron management.  Enron at one point had  assets of $64 billion, and was praised by politicians and the press alike for rapid growth.  The bankruptcy of Enron led to convictions of Lay and other members of Enron upper management; the passage of Sarbanes-Oxley; and the bankruptcy of the Arthur Andersen accounting firm.  Lay eventually committed suicide.

Since Lay was a significant campaign contributor to George Bush, Democrats gleefully tried to link the two, insinuating that somehow President Bush must have been aware of, or facilitated, the crimes of Enron management.  Check google- there’s over 1.7 million links when you google “Enron Bush”.

Never mind that Enron also had close ties to Democrats, particularly the Clinton administration.  For instance, Robert Rubin tried to get the Clinton Treasury Department to intervene when Enron’s credit rating was threatened, in exchange for which he was offered a position on Enron’s board.  The Clinton administration guaranteed over $1 billion of loans to Enron in return for which Enron raised more than $2 million for Democrat causes.  For a summary, see, for instance, this.

Fast forward to today.  Enron and MF had comparable assets- $45 billion for MF, versus $64 billion for Enron.  Both were taken down partly because of dubious off-balance-sheet transactions.  But MF has the additional distinction of having commingled customer funds with its own, which seems to have resulted in $600 million in losses by people who never should have been impacted by MF’s financial misadventures.  The stench from this is just awful, and is simple to understand- MF basically stole money from innocent third parties.

Look also at the political situation of MF versus Enron.  Whereas Enron had ties to both Republicans and Democrats, MF’s CEO is a Democrat through and through, with very close ties to Obama.

BUT- in 2001, the press and Democrats worked hard to make Enron exclusively a Republican scandal.  They are still reaping benefits from this when they portray Republicans as being responsible for the 2008 meltdown and hence not to be trusted with financial stewardship of the US economy.

What will the Republicans do with the MF scandal?  What they should do is to link MF and Democrats whenever possible, especially in the context of Dodd-Frank, which was apparently not at all adequate to prevent this sort of mess.  They also should express some of the outrage which people like me and many, many others feel about what John Corzine has done.  This is a great opportunity for Republicans to recast themselves as the grown-ups when it comes to financial regulation.  It’s part of a pattern which also recently includes the lack of action by Obama to block the transfer of $53 trillion of toxic derivatives of BOA onto taxpayers; and on and on.

 

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