11/06/2008 05:12 am ET Updated May 25, 2011

The Smartest Guys on Wall Street

After seeing the collapse of some of America's most highly esteemed financial services corporations and the federal government's subsequent attempt at bailing them out, I thought it would be a good idea to once again view the 2004 documentary about the bankruptcy of Enron, "The Smartest Guys in the Room." One fleeting clip from the documentary seemed to sum up the whole mess on Wall Street: At a ceremony at the Baker Institute for Public Policy at Rice University, Enron CEO Kenneth "Kenny Boy" Lay, with the Bush Family consigliore James Baker standing at his side, presents something called the "Enron Prize" to then Federal Reserve Chair Alan Greenspan who graciously accepts the tainted gift before an adoring crowd of erstwhile young capitalists.

I always thought it was not a good sign that the single corporation most heavily connected to George W. Bush's political career -- Enron -- turned out to be nothing more than a collection of venal and corrupt junior-varsity wannabe Mafiosi. After years of throwing around millions of dollars in political campaign contributions and lobbying for deregulating California's energy markets, Governor Pete Wilson (now a top adviser to Arnold Schwarzenegger), signed "Kenny Boy's" deregulation into law in 1996. Enron's "energy traders" then aimed to destroy the state (and pump up Enron's stock) by ripping off its energy markets to the tune of $30 billion. Dick Cheney's "energy task force" conspired with Enron to block the Federal Energy Regulatory Commission (FERC) from imposing price controls to stop the bleeding. And the state of California has been fiscally screwed ever since.

Enron, like the now disgraced Wall Street flim-flam artists, was "marking to market" like nobody's business, as well as trading crazy derivatives in indecipherable Ponzi schemes.
Many of the same investment banks that are central to the current Wall Street crisis were gaming the system during Enron's long slide into bankruptcy. Investors from Merrill Lynch, Morgan Stanley, Chase, Citigroup and other firms pumped money into some of Enron's "special purpose entities" in exchange for Enron stock. They increased the paper value of Enron by financing phony partnerships like "LJM," and then sold off the artificially inflated stock for enormous profits. They knew Enron was involved in illegal and corrupt activities both on the West Coast and abroad, but that didn't stop them from facilitating the fraud (and making a killing in the process). Unlike Enron's employees with their measly 401ks, the investment banks (along with Kenny Boy and Jeff Skilling) could dump their stock any time they pleased. A few people went to jail, including four high-ranking Merrill Lynch executives, but the Bush administration and the Republican Congress largely covered up the criminality. Then came 9-11 and the whole episode was forgotten.

Later, when it was learned that Wall Street banks played a pivotal role in similar schemes that tanked Global Crossing, Tyco, Adelphia and other corrupt companies, the only "reform" to come out of the travesty was the tepid and toothless "Sarbanes-Oxley Act," which called for "transparency" but never really got it. Had there been a vigorous effort at that time to reel in the big players on Wall Street, the crisis we now face might have been avoided. But as Sarah Palin pointed out in her recent debate with Joe Biden, looking at the past will not "progress the agenda." (With such a worldview one wonders why anyone would ever bother to study history at all.)

The current crisis is much bigger than we now know. It will take months, if not years, to untangle the layers of fraud, corruption, and malfeasance both on Wall Street and inside the Bush administration that produced the nation's worst financial meltdown in 70 years. There has got to be aggressive criminal investigations across the board. Those who lobbied for deregulating the financial services sector, (like Enron had done with California's energy market), are just as culpable as those who took advantage of the free-for-all that followed. Some people need to be indicted. Some people need to go to jail -- And I don't mean fall guys.

We seem to have learned nothing from Enron. And we probably won't learn anything from the latest Wall Street catastrophe either. Even in the face of the Enron collapse Kenny Boy and Jeff Skilling were still calling for greater deregulation to make their illegal activities -- ex post facto -- legitimate. The Bush administration's SEC performed similar to the FERC during Enron's rape of California. The cop on the beat was on the take.

It's astounding to hear calls from John McCain and Sarah Palin for more deregulation. McCain and Palin in recent interviews, speeches, and debates keep calling for "less government" and more "freedom," which have been euphemisms for deregulating big business since the Reagan days. Even though millions of people would have lost their Social Security in the meltdown had their accounts been privatized, McCain-Palin are still calling for privatizing the program. The 2008 Republican Party platform states: "We believe the solution should give workers control over, and a fair return on, their contributions. . . . Comprehensive reform should include the opportunity to freely choose to create your own personal investment accounts which are distinct from and supplemental to the overall Social Security system." The McCain-Palin ticket is calling for the same old greedy and dangerous policies that produced the financial crisis in the first place and put millions of Americans at risk -- on steroids. It's a national disgrace to see a cranky, pissed-off rich old white guy, along with his vapid beauty queen/sportscaster running "mate" muddying up the waters to try to deflect blame from the Republican administration, even while running for Bush's third term.

The Republican Party subjected the nation to a 28-year sociological experiment in Neo-liberal economics. And as it did in Latin America and other parts of the world, it was an epic failure. The rich got richer while working people saw their living standards decline. And, as always, taxpayers were left paying the bill.

What more evidence do we need that America's corporate culture at the highest levels has become sociopathic? They would not have thought twice about gambling with millions of people's Social Security accounts. Without criminal prosecutions and vigorous re-regulation of the financial services industry this amoral, exploitative culture will devour the country. Some people, such as Hank Paulson and his buddies, might be smiling right now after Wall Street successfully shook down Congress for $1 trillion, but this taxpayer subsidy is probably only a down payment.