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The Flipped-Over Rock

February 21, 2002

By WILLIAM SAFIRE




WASHINGTON -- What wife of a United States senator profited
from her close association with a big company that did
heavy lobbying of the federal government and then went
bust, costing investors billions and workers their jobs?

Why, Wendy Gramm, most recently awakened watchdogs would
say, wife of the Republican Phil Gramm of Texas, previous
chairman of the Banking Committee. As a director of Enron,
she was on the audit committee that didn't question the
fast-and- loose auditing, and (subtracting the deferred
compensation that went into the tank) received about
$220,000 over eight years.

That's peanuts, say Republicans. The senatorial wife who
hit it big was Anne Bingaman, married to New Mexico's Jeff
Bingaman, chairman of the Energy and Natural Resources
Committee. As lobbyist for the telecommunications comet
Global Crossing, which went bankrupt last month, she
received $2,500,000 for six months' work during 1999.

Both senatorial wives are accomplished executives who
parlayed responsible government appointments into lucrative
private positions.

Wendy Gramm was chairman of the Commodity Futures Trading
Commission. Anne Bingaman was Bill Clinton's assistant
attorney general for antitrust until leaving in June 1996.
Her lobbying fee for delaying approval of a competitor's
undersea cable still makes Beltway bandits gasp.

This juxtaposition shows that the Enron scandal is having
only bipartisan political fallout; in this case, the
"everybody did it" defense works. (You can bet that neither
spouse will be subpoenaed and publicly humiliated by the
club member Fritz Hollings at the Commerce Committee.)
Because both the biggest bankrupt (Enron) and the
fourth-biggest bankrupt (Global Crossing) made
contributions to politicians of both parties, the resulting
public disgust has been used to advance bipartisan campaign
finance reform.

Enron, which mostly embarrassed Republicans, has been wrung
dry in the media; the sight of the tilted "E" symbol
elicits yawns from viewers. It's the telecommunications
giant Global Crossing's turn in the barrel; now we'll be
hearing about Clinton connections on its board and its
boss's million-dollar contribution to the Clinton library.

Especially delicious will be the examination of Terry
McAuliffe, the fabled fund-raiser whom Bill Clinton
insisted the Democratic National Committee take on as
chairman. McAuliffe says he merely invested $100,000 in
Global Crossing and sold it for $18 million, and what's the
big deal? What his D.N.C. spokesman won't say is what price
per share he paid before the company went public, and what
that stock was worth when it went on the market - and what
he did to earn the difference. (Same question could be
directed to Bush the elder.)

But after the politicians tire of wounding each other and
declare a truce, we may see some overdue action on the
control of financial derivatives. These are the
investments, often off the books, in futures and currencies
that slice and dice risk and have made instant
billionaires, but whose abuse has been disastrous to
investors from Orange County to Long-Term Capital
Management.

Hedge funds are supposed to spread and reduce risk; in
reality, they are often used to make huge bets unknown to
their institutional investors. Accountants are supposed to
enforce disclosure of all liabilities, but many have become
expert in the concealment of risk.

I don't profess to understand the worries some of my
financial sources express about dangerous excesses in the
convertible bond market, "swaptions" and ever-narrowing
derivatives. But my unwillingness to break my head learning
these intricacies gives the wheeler-dealers an edge.
Complication and secrecy are mother's milk to them, while
the average investor's best protection is full disclosure.

When you flip over a flat rock like Enron or Global
Crossing, you see much panicky scurrying-about by those who
like to work in the dark. For too long, new-economy
corporate creeps and their accounting Heeps have hidden
risk in arcane off-the-books dealing. The new S.E.C.
chairman, Harvey Pitt, seems not to get it: Stop pretending
it's a political scandal and start dealing with the
accounting and derivatives scandal.

http://www.nytimes.com/2002/02/21/opinion/21SAFI.html?ex=1015395556&ei=1&en=2af09e94be84eaa6



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