Remora

Go when the going's good department

Perhaps now that Bushypoo has established himself as this generation's FDR, he should resign. That way, he'd not suffer the inevitable debilitating fall in polls and status that happens to all Bushes in office. The reason for that fall is that Bushes can only exist in a rare environment, one in which the air is constantly perfumed by millions of dollars. Usually that is no problem in the White House, where you can secretly confab with Ken Boy and co. on global warming and such, but sometimes a Bush is thrust out into the normal atmosphere -- especially when the Bush has to campaign, or meet with (ugh) environmentalists and those civil rights leaders -- and eventually the Bush starts to wilt and get all cranky.

As a monument to Bush idiocy, the NYT has a profile of SEC chairman Harvey Pitt today.
Here we have a fairly common specimen of the higher idiocy so typical of the nineties, when the word deregulation began to be confused with the word abracadabra. It should be said at the outset: regulation, or rules and norms, are going to emerge in any market situation. The question is who is going to make them, and how are they going to be enforced. If they are made by market makers -- if, for instance, Enron makes the rules about energy derivatives -- other market members are going to have to apply those rules, try to get around those rules, or cease existing in the market. The advantage of being a market maker consists in being able to make the rules. These rules can be formal, as in the rules the NYSE makes, or informal, as in the rules that emerge when banks invest in X company on the premise that X company will copy the rules of some successful Y company.

Now, deregulation as it applies to accounting entails ignoring that the rules are going to be made, and claiming that only the government makes rules. Error one. Error two consists of the ideological claim that government is always bad. This claim has become theological. In spite of the evidence that, for instance, publicly run power companies do a comparable or better job than private power companies (compare LA's public power company to Southern Edison, if you want immediate support for this claim), this is the conservative mantra. It has the same relationship to reality as the doctrine of original sin has to psychology: it magnifies an insight into an untruth. Combine these two errors and you get Harvey Pitt.

Lets say some exciting things about accounting, shall we?

Since accounting on the Ernst and Young level is not heavily competitive, this means that the five market makers basically decide what the rules are. And they obviously suck at it, for the good reason that rules that promote transparency are not necessarily rules that all of their clients want to see followed. Gresham's law, which says that bad money drives out good, applies to rules as well. So hey, guess what? This is where a neutral party, ie the gov, has a role. It establishes the ground rules for all parties. This is elementary Locke, but seems to have escaped the attention of the greedy deregulatory crowd.

Here are three grafs from the NYT article. Reading them, it is easy to see that the Bush years are going to be studded with Enrons. These people have that deadhead Texas wealth mindset, the kind that the Hunt brothers used to embody:

"Since his return to the agency last September, Mr. Pitt has articulated a broadly deregulatory agenda that he says is now more relevant than ever, but which his critics say may now be overshadowed by what is quickly turning into a major accounting and corporate scandal.

If anything, the critics say, in light of more than $60 billion that Enron shareholders lost, it is time not to reduce the liabilities of auditors and corporations, but to increase them.

The S.E.C. for months has been woefully short of staff at its senior level and now has only two commissioners, including Mr. Pitt, because the White House has failed to nominate other replacements. The other commissioner, Laura S. Unger, who is also a Republican, is serving even though her term has expired and she has announced her intention to leave shortly."