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Bush digs himself into a hole and keeps digging

A photo of US President George W. Bush endorsing a product on a counter in a departmental store in Beijing last week. President Bush's business record is under public scrutiny as he lectures Wall Street on the need for corporate responsibility. PHOTO: AFP

The President started last week trying to save corporate America. He ended it trying to save himself.

"My friends are crooks. The companies they run look corrupt. The regulators I appoint are too soft. My colleagues in government face lawsuits for fraud. But I'm going to solve corporate crime with some ass-kicking laws. Hey, and trust me, I'm the President."

After a week in which markets globally were badly wounded by the Dow -- which fell 700 points, dragging the FTSE down by nearly 400 -- it is clear that not only Americans but people around the world are in no mood to take George W Bush and his promised crusade against corporate corruption on trust. In fact, the attempt to appear tough on WorldCom, Enron, Andersen and the rest ahead of mid-term elections in November turned out disastrously.

Day 1: Bush held a rare press conference to gain the initiative a head of his key Wall Street speech. Instead, he was rocked onto the defensive over allegations concerning his own financial dealings in the oil company Harken Energy.

Day 2: In Tuesday's speech, Bush said "too many corporations seem disconnected from the values of our country". He listed measures, including a task force that would be a "financial crimes Swat team," anti-shredding laws, a US$100 million boost for the Securities and Exchange Commission, the forfeiture of pay gained by deception, greater accountability for CEOs, and an increase in prison terms for fraud to ensure "those who breach the trust of the American people are punished".

It read like a plea for credibility. It was snubbed. Democrats, led by the presidential hopeful Tom Daschle, ridiculed both the rhetoric and substance, highlighting Bush's refusal to endorse a tough package of laws being proposed by a Democrat, Senator Paul Sarbanes. Bush was the "unconnected" one. As the Dow slid, a Democrat aide said: "The markets clearly don't think he has gone far enough, and neither do we."

Then it got worse.

Day 3: Vice-President Dick Cheney was named in a civil action against construction group Halliburton and its accountants Andersen.

The details of the contested action, in which Halliburton directors are accused of colluding to inflate the company's earnings, read disturbingly like the Enron case and follow the opening of a separate SEC investigation in March.

Day 4: It emerges that Bush received a low-interest loan from Harken -- something that WorldCom chief executive Bernie Ebbers (currently under investigation) did, and which Bush said should be banned.

Throughout all of this some critics made a direct link to Bush and his well- known connections with rich businessmen, particularly fellow Texans. Chuck Lewis of the Centre for Public Integrity, which investigates links between politics and business, says: "The reason that he does not have credibility in trying to deal with big business is that in the public mind he is seen as in their pockets."

New York Representative John LaFalce, senior Democrat on the House of Representatives financial services committee, says: "He denied debate for the past year and a half -- especially since Enron -- as the problems were beginning to surface, and did so very little. Then because of WorldCom and because of growing sentiment against corporate America and Wall Street, he felt compelled to do something.

But neither his words nor his demeanour on Tuesday had any credibility."

Republicans retort that Bush's speech was tough. Several of Bush's proposals -- forfeiting pay, preventing executives trading shares during closed periods, preventing analysts misleading markets -- sound similar to the Sarbanes program.

But this, says LaFalce, is misleading. For example, the US$100 million SEC budget increase is dwarfed by more than US$700 million proposed by Democrats. The shredding proposals are a "smokescreen" to keep attention on Andersen, not Bush's Texas friends at Enron.

Instead of a catchy "Swat team," Sarbanes proposes a prosaic but independent Public Company Accounting Oversight Board. This will have the power to inspect big accounting firms every year and investigate complaints about firms. Companies should not be able to offer consulting to firms they audit. He demands compulsory rotation of firms.

The controversy is set to rumble on, much to the delight of Democrats. Sarbanes's Bill is expected to clear the Senate next week, but it must then be combined with weaker measures proposed in the "Oxley" Bill from the Republican-controlled House.

LaFalce indicates Bush's support for Oxley will be used to beat him. "He praised the House-passed Bill, which gave away everything. That revealed his true colors."

President George W. Bush plans next week to emphasis strengths in the economy, such as low inflation and interest rates, after US stock indexes slid to their lowest level since 1997.

Bush will stress that "the economy is fundamentally sound" during a roundtable discussion Monday about the economy at the University of Alabama, White House spokesman Gordon Johndroe said.

It's part of an effort to reassure investors and financial markets, which continued to tumble this after Bush traveled to Wall Street and promised to crack down on accounting lapses at US companies.
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