Former Treasury Secretary Paul O'Neill: Bush Doesn't Understand Crisis, 'It Shows'

I read Ron Suskind's book called "The Price of Loyalty George W. Bush, the White House, and the Education of Paul O'Neill," and there's a chapter th

I read Ron Suskind's book called "The Price of Loyalty George W. Bush, the White House, and the Education of Paul O'Neill," and there's a chapter that is a prequel to the economic nightmare we are facing today. O'Neill wanted CEOs to be held accountable for their financial records that their companies made public. Enron was the red blinking light, so to speak---the PDB that told the administration disaster was a-coming. Remind you of anyone? The CEOs are Bush's base and they balked big time. I was trying to scan a couple of pages for you, but thankfully Suskind printed this in the NY Times times called 'The Crisis Last Time."

The crisis of that moment was the implosion of Enron, Global Crossing and other companies. Along with conflicts of interest and criminally creative bookkeeping, the culprit was often a combination of financial complexity and insanely expensive compensation packages.

Enron is long gone, but this episode - as much a warning for our financial security as the 1993 World Trade Center bombing was to the threat of wider terrorism - carries some telling lessons as our best minds struggle now to save the economy.An article about the meeting appeared a few days later in The Wall Street Journal. The next day, Mr. O'Neill was in Florida addressing chief executives of America's top 20 financial services companies. They piled on. One told the Treasury secretary that he'd "rather resign" than be held accountable for "what's going on in my company." A phalanx of outraged financial industry chiefs, many of them large Republican contributors, called the White House. Real reform was a political dead letter.

A presidential speech that followed was toothless, mostly recommending that chief executives personally certify their companies' financial statements. Earnings per share remained the gold standard. The Sarbanes-Oxley bill, signed into law a few months later, largely focused on the auditors, and actually increased the complexity of reporting practices. As for lawsuits? Not to worry. No significant rise.

At issue, of course, were those twins, transparency and accountability. The years since have shown that the first one is meaningless without the second. With a world financial crisis upon us, the president and his economic team are forced again to talk about accountability. Let's hope this time they mean it.


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Paul O'Neill then came out with this today: Bush Doesn't Get Financial Crisis, 'It Shows'

So why is the president and his administration pushing so hard for this plan?"I think it's because they're in a panic and they haven't thought about it very well," O'Neill said.

The bailout process risks being bogged down by a number of "sideshow issues," O'Neill added, including executive pay and aid for homeowners.

"Not a lot of people are saying, 'Slow down.' They've actually done something a lot worse than say, 'Slow down.' They've introduced a whole bunch of sideshow issues like executive compensation and oversight committees," O'Neill said. "All of that stuff is not relevant to the central problem of re-liquefying these financial instruments."

O'Neill said we got into this mess because bankers were not making prudent decisions, because they believed that by reselling mortgages to Wall Street they weren't going to be stuck with the problems.

"We suspended disbelief and said we can take people with no known source income or wealth generation and we can give them a $500,000 mortgage," he said. "I think there's a very important thing: When you violate fundamental principles of economics you can get away with it for a while, but eventually it's going to get you."

There are a lot of side shows going on for sure and the American tax payer is getting royally screwed as usual by Conservatives. All these nice little safeguards they are putting in place to somehow protect us will be useless. At least he didn't blame the poor people for the crisis and apply the Kudlow thesis to it...

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