Ron Paul: 'It Wasn't Lack of Regulation That Caused the Enron Scandal'
After watching this Saturday night's Mike Huckabee Republican Presidential Forum on Fox "News", I was left wondering what was worse; the panel of three right wing Attorney Generals that consisted of Virginia AG Ken Cuccinelli, Florida's Pam Bondi and Oklahoma's Scott Pruitt being chosen to ask the questions that often looked more like campaign speeches than anything that should be considered worthy of a presidential debate, or the answers that were given by the candidates.
Ron Paul was asked by Pam Bondi about President Obama's recent comments on Republicans' approach to the economy and in typical Libertarian fashion, Paul manages to throw out the baby with the bathwater when it comes to the government having a role in regulating the behavior of industry. Paul gets it right when it comes to industry's undue influence over how regulations are written in the first place (meaning they're toothless or meaningless), but terribly wrong when it comes to the fact that corporations do need meaningful regulation in place if we don't want them doing great harm to our economy as Enron did.
BONDI: President Obama has had the audacity to say that the Republican approach to the economy means dirtier air, dirtier water and less people with health insurance. Is that really what less federal regulation means?
PAUL: Hardly. As a matter of fact, I get charged with that all the time, you know, because I don't want the federal regulations and most Republican conservatives don't need, or think we need more federal regulation and say, “Oh you're going to have, you know, people in the streets with no medical care. The whole thing is, if you don't have regulations, say in the environment and everything, or regulations on, banking regulations, actually, the market is a real strict regulator, it's a stricter regulation.
Our problem today is when you write the regulations, say on drugs, the drug companies get involved and they write the regulations. Banking regulations are written by the banking community. They become the lobbyists. So it isn't the lack of regulation.
But if you have the market, you have property rights, you have contract rights and you have bankruptcy laws and those are strictly enforced, it wasn't the lack of regulations that caused the Enron scandal, but it was the market that took care of it.
Those individuals were convicted in Texas court for fraud and they went to prison. So no, we have to answer back. I think we do a lousy job on that, saying that they, the liberals grab the moral high ground and say that we're going to take care of everybody and if you don't do it everybody's suffering, there won't be any medical care. So it is up to us to argue the case that the market can answer that. The free market and property rights can solve just about all of these problems much better than more bureaucrats in Washington.
I hate to break it to Paul, but the "free market" didn't convict those Enron executives. The government did.
Here's more on just how the lack of regulation was exactly what caused the Enron scandal to be allowed to happen in the first place -- Blind Faith: How Deregulation and Enron’s Influence Over Government Looted Billions from Americans:
SUMMARY OF FINDINGS
The combination of unregulated state wholesale electricity markets and federal deregulation of commodity exchanges has removed accountability and transparency from the energy sector, allowing corporations to manipulate price and supply of electricity and natural gas through the exercise of significant market power. California’s recent energy crisis and Enron’s bankruptcy would have been impossible under a regulated system.
Enron developed mutually beneficial relationships with federal regulators and lawmakers to support policies that significantly curtailed government oversight of their operations.
Enron’s business model was built entirely on the premise that it could make more money speculating on electricity contracts than it could by actually producing electricity at a power plant. Central to Enron’s strategy of turning electricity into a speculative commodity was removing government oversight of its trading practices and exploiting market deficiencies to allow it to manipulate prices and supply.
Dr. Wendy Gramm, in her capacity as chairwoman of the Commodity Futures Trading Commission (CFTC), exempted Enron’s trading of futures contracts in response to a request for such an action by Enron in 1992. At the time, Enron was a significant source of campaign financing for Wendy Gramm’s husband, U.S. Senator Phil Gramm.
Six days after she provided Enron the exemption it wanted, Wendy Gramm resigned her position at the CFTC. Five weeks after her resignation, Enron appointed her to its Board of Directors, where she served on the Board’s Audit Committee. Her service on the Audit Committee made her responsible for verifying Enron’s accounting procedures and other detailed financial information not available to outside analysts or shareholders.
Following Wendy Gramm’s appointment to Enron’s board, the company became a significant source of personal income for the Gramms. Enron paid her between $915,000 and $1.85 million in salary, attendance fees, stock option sales and dividends from 1993 to 2001. The value of Wendy Gramm’s Enron stock options swelled from no more than $15,000 in 1995 to as much as $500,000 by 2000.
Phil Gramm is the second largest recipient in Congress of Enron campaign contributions, receiving $97,350 since 1989.
Days before her attorneys informed Enron in December 1998 that Wendy Gramm’s control of Enron stock might pose a conflict of interest with her husband’s work, she sold $276,912 worth of Enron stock.
Enron spent $3.45 million in lobbying expenses in 1999 and 2000 to deregulate the trading of energy futures, among other issues.
There's another 29 pages where that came from if anyone wants to read the rest.
So yes, there is a problem as Ron Paul stated that politicians are bought off and helping to write regulations. The problem with Enron was that it resulted in them being deregulated, and not regulated, and being left to the "free market" to do whatever the hell they wanted to the point that the government and regulators had no control over, or oversight over their bad business practices that led to the destruction of a huge part of the entire American economy.
Most utilities, thankfully kept to their previously regulated business models and didn't find themselves in the mess Enron did, or god knows what would have happened to our economy since Enron did enough damage on their own at it was. Enron, on the other hand, decided to run with that new "free market" business model that Paul is so fond of to see what they could get away with, and the entire country was suffering enormously in the aftermath of that debacle as a result.
But what's up is down in Ron Paul free market Libertarian land. This is the kind of stuff that infuriates me about Paul even though I do actually agree with him on a few issues, and why I believe his political views are dangerous. He's an anarchist when it comes to regulation and the economy and doing anything to protect average citizens or even keeping bad business from harming themselves and their stockholders and their employees who were also stockholders in a great number of cases, like Enron, from their worst instincts if the wrong people are running these companies.
I believe any thinking person can agree that there are good regulations that make sense and bad ones written for bad reasons and regulators that do their job and those that don't; and the issue is a complicated one that has to be taken on a case by case basis if anyone is going to debate the merits of why those regulations were written in the first place and how they're being enforced and why. Ron Paul just wants to throw them all out and let businesses regulate themselves.
Claiming that a lack of regulation did not cause the Enron scandal is just a complete denial of reality.
2012 Election Central has more on the forum and the entire video available here -- Huckabee GOP Presidential Forum tonight at 8pm ET.
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