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A number of readers

A number of readers have written in to argue that there's nothing wrong or out of the ordinary with the document shredding Arthur Andersen's accountants did over at Enron. One even tells me it's standard operating procedure over at Ernst & Young where his sister works.

Be that as it may, I feel pretty vindicated by today's announcement that Arthur Andersen has summarily fired David B. Duncan, the lead partner on the Enron account.

Another reader points out yet another interesting fact. It turns out that David B. Duncan and Kenneth L. Lay are both on the board of directors of the American Council for Capital Formation.

Now it's important to note, the ACCF is neither part of nor connected with the United States Institute for Economic Efficiencies, the Academy of Trickle-Down Sciences, the Center for Deregulation and Frictionless Markets, or the Club for Growth. (Actually, here's where the joke breaks down, because there really is a Club for Growth - it's a supply-side pressure group that gangs up on normal Republicans in the Northeast ... )

In all seriousness, I'm really all for markets, capitalism, and capital formation. (In a round about way it's one of the reasons I'm now freelancing rather than at my old job.) And to prove it, I'll even make a direct pitch to support Talking Points Memo with an easy online donation!!!

And if that's not enough, to fill the void left in the frictionless commodity market world by the Enron collapse, tomorrow we'll debuting our new online market in Ken Lay and David Duncan prison term years.

If youre down in

If you're down in the dumps or need something to pick you up I really can't recommend enough that you stop by the Enron website and browse through the sections of the site that predate the bankruptcy.

I've commented previously on the dopiness of Enron's glammy, wise-guy Schumpeterian ad campaign. But most of their website now reads like a cacophony of gag lines and double meanings.

Like this beaut from their 'Who We Are' Page ...

It's difficult to define Enron in a sentence, but the closest we come is this: we make commodity markets so that we can deliver physical commodities to our customers at a predictable price. It's difficult, too, to talk about Enron without using the word "innovative." Most of the things we do have never been done before ...
Some posts just pretty much write themselves.

Top ten innocent explanations

Top ten innocent explanations for Arthur Andersen's end-of-Enron document shredding party.

10. Arthur Andersen company simply making a quick transition to fabled "paperless" office.

9. Collateral damage in effort to destroy all circa-1998 George W. Bush 'I wanna be president' coloring books.

8. Enron kept books in pre-2002 European currencies now supplanted by the Euro.

7. Cool new portable paper-shredder from OfficeMax just too big a temptation.

6. Who doesn't throw away receipts?

5. Documents mistaken for mail and disposed of in a fit of Anthrax-scare hysteria.

4. Compassion for over-worked, grunt congressional staffers who will be running the investigation.

3. Incinerated paper is surprisingly efficient new energy source!

2. Just a mistake. Thought they were records of Cheney Energy Taskforce.

1. Accountants just love doing time.

I think you can

I think you can safely say that this new Enron article in the Washington Post is profoundly damning.

Here's Enron attorney Bob Bennett explaining why Enron ordered an intentionally superficial and non-probing internal investigation into its own accounting methods.

Bennett said Enron told the lawyers not to second-guess Andersen's accounting and not to make a detailed analysis of particular transactions because he thought speed was essential and had no reason to question Andersen's work.
Like they say, when the facts are on your side, you pound the facts.

When the law's on your side, you pound the law.

When you got neither, as would seem to be the case with Bennett's new client, apparently you give your own credibility a pounding.

Is it too early

Is it too early to raise this rather elementary question? Was Phil Gramm's retirement from the Senate in early September tied to the Enron debacle?

Consider the timing.

True. There had been talk of a possible Gramm retirement, but as late as August 16th, in a discussion of possible Republican retirements, the Washington Post wrote ...

Another Republican incumbent who has left his party guessing is Sen. Fred D. Thompson of Tennessee, who has indicated he will decide by late fall, say GOP sources. Like Helms, Thompson has raised little money but would probably have little trouble catching up. Thompson is favored to win if he runs, but Democrats believe the race could be close if the field is open. The only Senate incumbent who has said he will retire next year is 98-year-old Strom Thurmond (R-S.C.). Democrats, who so far have avoided retirements in their ranks, nurse hopes that GOP Sens. Phil Gramm (Tex.) and Pete V. Domenici (N.M.) might retire, but Republicans say they're pipe-dreaming.
Consider what else was happening right about that time.

Two days before the Post story, on August 14th, Enron CEO Jeffrey Skilling quit after only six months on the job for what he called "purely personal" reasons. According to CNN, stock analysts were "stunned."

Knowing what stock analysts couldn't have known then, it now seems pretty clear that Skilling quit because of the first rumblings of the earthquake that would leave the company bankrupt in less than six months. Around the middle of August, it seems fair to say, he knew things were very, very bad.

Gramm's wife, Wendy Gramm was on Enron's Board and -- even more important -- on the board's audit committee. If things were going very wrong, and if the problems centered on the company's books being cooked, she'd likely be one of the first to know. And she would probably learn about it soon after Skilling. That is to say, sometime in late August.

Senator Gramm announced his retirement on September 4th.

Is all this speculation? Certainly. But the timing is hard to overlook. And besides, he's not the only high-profile Texan in Congress to make a surprise retirement announcement last Fall.

Remember that much-ballyhooed speech

Remember that much-ballyhooed speech Tom Daschle gave last week ripping into President Bush's tax-cutting fiscal policy? Remember the oh-so-thin pancake the President made out of Daschle over the next few days when he dared Democrats to raise taxes "over my dead body."

Before this goes any further, let's confess that Hill Democrats are suffering from a crying deficiency of good strategy. It's not that Daschle's argument was bad on the merits. What it lacked was coherence. And in political battles coherence is king.

Daschle says the tax cut was bad. But he doesn't want to raise taxes. But that means we may have dip into Social Security revenues, or maybe raise taxes, or go into deficit spending. And all of those are bad. And so on and so forth.

Bush doesn't want to raise taxes, period.

Is this just the power of the presidency? The difficulty of running the opposition from the Senate?

I don't think so.

The key here is that Democrats are letting themselves get baited into the trap of solving the problems created by Republican policies, which is a category strategic error.

The president and his party promised X would happen and Y happened. They said that deficits wouldn't return and they did return. They had the power and authority to do it their way and now they have to take responsibility for what's happened.

It's not for the Democrats to figure out how to clean up Bush's mess or solve his problem for him. This is about taking responsibility. Something the Republicans seem quite unwilling to do. They blame the return of structural deficits on the war on terrorism and the downturn in the economy, each of which play a smaller role than the results of their own policy.

(Eventually, Americans will weary of such cynical use of the 9/11 attacks.)

Even with nominal control of the Senate, Republicans still basically run the show in Washington. So it's for Republicans to answer how they'll get the country out of the fiscal ditch they created.

This whole debate is about responsibility and values. Doing what you said you would do and cleaning up the mess you created.

Here are just a

Here are just a couple examples of why the quickly unfolding Enron investigation may lead in unpredictable and uncontrollable directions.

It turns out that Enron execs weren't the only ones who called Treasury Under Secretary for Domestic Finance Peter Fisher on the company's behalf as the energy trading collosus swirled into oblivion. Former Clinton Treasury Secretary Robert Rubin did too.

(As a side note, it seems worth noting that the administration was quite eager to get out news of Rubin's call. But their eagerness doesn't make it less true.)

Meanwhile, SEC Chairman Harvey Pitt is in a bind because he once represented Arthur Andersen, the accounting firm which at the very least woefully botched Enron's books, and now appears to have destroyed many crucial documents.

The revelation about Pitt makes this earlier post seem not so sarcastic.

It's still possible that this is just a cataclysmic bankruptcy for which a few malfeasant executives will pay a stiff price. Or more likely it will turn out to be a conventional political scandal, in which a handful of politicians are dragged down in the whirlpool of Enron's collapse.

But those pooh-poohing the notion that this could be a major scandal of any sort overlook the less than likely, but yet real, possibility that this could develop into a meta-scandal - a cascade of revelations which gain traction not because of specific or discrete criminality but because the sheer magnitude of the event delegitimizes the whole framework of interaction between government and corporations at the highest levels.

Because Enron was part of a peculiar Texan form of wildcatter capitalism, and this Texan administration is closely tied to it, a scandal even of such proportions could still cut in a decidedly partisan direction. It's no accident, for instance, that Harvey Pitt finds himself in this situation, as opposed to ... say, former SEC head Arthur Levitt. So probably it just hits the GOP.

But who knows?

One of the more

One of the more interesting things about Enron political donation pattern is not just its partisan tilt, but the way it became more partisan - ie, more Republican - over time. This chart from the Center for Responsive Politics website shows that back in the early 1990s Enron giving was more GOP than Dem, but only by a 60-40 margin.

After the 1994 cycle, the Republican percentage of the take rocketed to more than 80%, reflecting not only the GOP takeover of the House and Senate, but the fact that two Texans - Dick Armey and Tom DeLay - had become the number two and number three in the House leadership.

In the Senate, the leadership team of Trent Lott and Don Nickles contained no Texans. But both came from energy producing states.

The margin for Democrats bounced back a bit in the '98 and '00 cycles, but not by much. And in the 2002 cycle we're currently in, Republicans were pulling in only slightly less than 90% of the take.

The Republican line is

The Republican line is that the public aversion to deficit spending is ... well, just so 20th century!

No one will care anymore. Especially after 9/11. I guess that's why the White House waits till late in the afternoon on a Friday have the reptilian Mitch Daniels tell the Associated Press that the President will propose a federal deficit for next year's budget.

What a coincidence.

Theres no shortage of

There's no shortage of committees on the Hill lining up to investigate Enron. And one of the key points of investigation is Enron's multifarious lobbying of the federal government.

But aren't we missing a rather obvious difficulty?

How many of the Senators and Congresspersons on these committees received campaign contributions from Enron? And do they have to recuse themselves?

And will anyone be left to run the committees?

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