President Bush: It's Time

While the big trade associations crow about the pro-business slant Congress took after Tuesday's historic election, we should recognize just how exasperated the American individual investor is. Pro-business should not mean "let businesses do whatever it wants." For several years, we've seen instance after instance of companies stealing from their own shareholders. If the administration fails to address this, 2004 will likely be much less fun for the GOP.

Format for Printing

Format for printing

Request Reprints


By Bill Mann (TMF Otter)
November 8, 2002

Big week this week. Congressional elections solidified control of the House for Republicans, and Republicans also unexpectedly retook control of the Senate. I have plenty to say about this.

Also this week, embattled Securities and Exchange Commission Chairman Harvey Pitt resigned in ignominy, a week after he was forced to open up an investigation against himself regarding information he withheld about William Webster and the Public Company Accounting Oversight Board. I have plenty to say about this, as well.

If those two things aren't enough, Alan Greenspan and his orchestra essentially recognized that the economy is still quite weak and dropped interest rates... for the 12th time in two years. I had plenty to say about this but blew most of it in a column Wednesday. So there ya go.

Every time I take a step into the business of politics and politics of business, I get a raft of emails accusing me of being everything from the second coming of Mao Tse Tung to the second coming of Benito Mussolini to the, oh, eighth or so coming of Niccolo Machiavelli. I am none of these things. But so we have the record straight, let me start by expressing my bias. I am a Republican who gets nervous when I'm in a room full of Republicans. I like the free markets. I also like law and order. Ineffective regulators make me sick. So do corrupt businesspeople, and so do people so blinded by party ideology that they cannot think.

OK? So fire away, when ready, but don't assume just because I think President Bush badly blew it with his management of investor confidence that I spent the '70s eating bugs in the jungle with Pol Pot. Mmmmmmm, bugs.

The elections, business, and you
Mere minutes after it became apparent that things were going quite well for the Republicans on Tuesday, my inbox started pinging. Many of the big lobbying groups were crowing about getting "pro-business" candidates elected to Congress, governorships, dog catcher, and so on. The U.S. Chamber of Commerce, for example, stated they had put significant "manpower and money in key U.S. House and Senate races in a successful effort to elect pro-business candidates." For this election cycle, the Chamber gave $18,000 to congressional Democratic candidates and $125,250 to Republicans. Seem like a big difference? Well, each side has its own sugar daddies -- the American Trial Lawyers Association gave $274,500 to Republicans versus $1.95 million to Democrats.

Regardless of which party and candidates won the elections, some big elements out there now feel like they're owed something in return for their contributions. And from an ideological perspective, one would think the companies supporting Republican candidates are, by and large, hoping for a more open environment in which to conduct business.

Democratic leaders tried pretty hard to blame Bush for the weak economy of the last two years. It didn't work because only the hopelessly delusional would believe someone who came to power in 2001 caused an economy to fall to pieces in early 2000 from poor decisions made in the late 1990s. That said, the recession (and yes, this is a recession) is now Bush's. It's his to take the blame for; it's his to address; it's his to fix. Two years into a recession for an economy of this size, one can believe that a manager inherited a mess. Four years into the same recession, and one has to conclude that the manager hasn't done a damn thing to solve the mess. And that manager had best expect some consequences.

Ah, consequences. If we go back to the Chamber of Commerce, they're excited that the majority of their "pro-business" candidates won. But investor confidence (and hence consumer confidence) depends on this question: "Pro-business to do what?"

More than 50% of American households own shares of stock. We are all owners of America's great (and not-so-great) businesses, and we expect success in these businesses to accrue to us as a result of this ownership. If the administration cuts businesses loose to lie, cheat, and steal -- even from their own minority shareowners, well, I don't think the public will stand for it. More companies have restated their earnings in the last six years than in the previous 80.

What now for the SEC?
Harvey Pitt, chairman of the SEC, stepped down this week, ending a reign fraught with external and internal turmoil. From the outset, Pitt seemed a bizarre choice as protector of investors' interests, having served as corporate counsel for most of the big accounting firms -- not exactly the kind of avocation that instills much confidence in investors that Pitt's primary concern is our protection. Unfortunately, his performance as SEC chairman shows we overestimated him.

When the SEC chairman has to call an investigation into his own failure to disclose knowledge of William Webster's involvement as a director of a fraud-addled microcap company, even Pitt's most ardent supporters shake their heads in disgust. (By the way, please take this opportunity to do your part by writing a letter to your representatives demanding a strong SEC chairman.)

The president's selection of Pitt gave detractors plenty of ammunition to point out that the Bush administration is beholden to big business. When the new oversight board chairmanship, first slated to go to true corporate governance activist John Biggs, fell to Webster (with minimal experience in the area), it compounded this impression. Auditors were terrified of Biggs and lobbied hard against his candidacy because they knew that he'd actually be a law-and-order kind of guy. If Bush hoped to restore some confidence in the stock market, he did absolutely the wrong thing.

In some ways, Harvey Pitt was a victim of timing. Just because the big scandals broke under his watch doesn't mean they happened under his watch. If you think about the big investing scandals of the last six years or so, the SEC managed to catch and prevent almost none of them. Point to underfunding, understaffing, whatever, but that's a disgrace, and at some point, the leadership of the SEC has to take responsibility. Now, two years into the Bush presidency, this position is once again open. As Fred Barbash said in his column, we need a cop in that position, someone who takes it personally when a fat cat tries to rip off investors.

This is America, a place where an entrepreneurial spirit is one of the great virtues. A person can show up on the shores of America with nothing, become successful, and be celebrated. Americans don't even mind if the rich get richer, as long as that opportunity is universally available. There are downsides to this -- not everyone succeeds, and sometimes people cheat to get there.

As I've stated in the past, there's really only so much the government can do to "fix" the economy. Economies go through cycles, and the only tools the government has are printing or spending more money. What the government does have control over is the environment of business. This administration has done precious little to give people confidence that someone is looking out for them. Americans don't mind people getting rich -- we mind someone getting rich at our expense.

That's what infuriates people about Ken Lay and the systematic looting of the American public by Enron. Not only did they steal, but they did so with the cooperation of their auditors and directors, all while blatantly and cynically lobbying the government for more friendly regulation. Again, much of this took place before Bush ever took office, but his actions have done nothing to make the average American feel more secure that their investment dollars are being guarded by those whose job it is to do so.

The oversight board was a nice step, but then Pitt blew it by caving in to industry pressure to pass on Biggs in favor of a less-threatening candidate. This, once again, was an opportunity for the administration to give individual investors -- who once again, comprise 50% of all American households -- reason to feel more confident in the economy and the public markets. Let there be no doubt that, in some ways, confidence enhances economic well-being. We are not confident because we're tired of seeing companies defraud their shareholders, and we're tired of seeing regulators act only when it's too late.

To people who have grown deeply cynical about the cozy relationship between business and our elected officials, the appointment of a William Webster to the oversight board is nothing more than a sign that our leaders don't give a rip about us.

President Bush, you've got two years. On Tuesday, you received a resounding victory by the electorate. Please do not assume this means we are completely satisfied.

Fool on.
Bill Mann, TMFOtter on the Fool Discussion Boards

Bill Mann owns no shares of the companies mentioned above. Bill is the managing editor of The Motley Fool Select, where you can find his best Foolish stock ideas you won't find anywhere else. The Motley Fool has a disclosure policy.