[lbo-talk] Flashback 2002: Ed Herman's "Corporate abuse-reform cycle" vs boom & bust cycles

B. docile_body at yahoo.com
Tue Nov 18 03:17:17 PST 2008


[From the co-author, with Noam Chomsky, of _Manufacturing Consent_. The more things change? - B.]


>From 2002:

http://www.theconversation.org/abuse-reform.html

June 29, 2002

The Corporate Abuse-reform Cycle Edward Herman

We are at the peak of the latest corporate abuse-reform cycle in which business abuses have been so severe, and their effects so conspicuous, that their low-key treatment and normalization by the mainstream media has been unsustainable.

During the past year the media have featured the Enron collapse; the Enron (and many other) management's conflict-of-interest dealings with and looting of their own company; Enron's (and other companies') manipulation of electric power prices and looting of California consumers and taxpayers; the conflict-of-interest and criminal actions of Enron's auditor, Arthur Andersen; the role of the major banks in helping Enron and others engage in various malpractices;

the disclosure that brokers had touted stocks underwritten by their investment banking department, but which they privately derided as "a piece of junk" or "a piece of crap" (in the words of internet stock analysts at Merrill Lynch); managerial overpayment and de facto looting via stock option plans, golden parachutes and other forms of more or less legal theft, all on an obscene scale; and the utter failure of regulation to curb these excesses.

The extensive publicity has sparked anger and distrust of business. Naturally, this distresses the corporate community, and some of its members, along with the media, are in the phase of trying to repair the damage. Business Week's Cover Story of June 24 was "Restoring Trust In Corporate America," with subtitle, "Business Must Lead the Way to Real Reform."

This was the same problem that faced the business community during the Great Depression. Business abuses of majestic proportions in the 1920s had helped inflate the stock market with borrowed money and unload on the public vast quantities of sure-fire dogs issued in the United States and abroad. The Great Depression collapsed these junkpiles and uncovered massive fraud in security markets and banking alike.

Some Wall Street dignitaries actually served prison time (notably, Richard Whitney, former president of the New York Stock Exchange). Business had a huge public relations problem on its hands, which also provided an environment in which REAL reform could take place. In 1934-35 this included creation of the Securities and Exchange Commission (SEC), public disclosure requirements for the sale of securities on the exchanges, the Glass-Steagall Act's enforced separation of commercial and investment banking, and the dismantlement of public utility holding companies.

[...]

http://www.theconversation.org/abuse-reform.html



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