Watch your money!

To avoid “another Enron,” President George W. Bush proposes measures to “help” workers protect their 401(k) money. Under Bush’s proposals, companies must allow workers, if they choose, to sell company stock after three years, a shorter period than many current pension plans allow. Additionally, Bush’s measures bar management from accessing their 401(k) funds if employees cannot do so. “If it’s OK for the captain,” said Bush, “it ought to be OK for the sailor.”

Democrats, naturally, say Bush fails to go far enough. California Sen. Barbara Boxer, D-Calif., for example, proposes measures to cap the percentage of company stock in a worker’s 401(k). Boxer said, “We need to stop the all-eggs-in-one-basket syndrome.”

First, a few facts about Enron.

Yes, according to The Wall Street Journal, management “froze out” Enron employees for a period of 10 trading days as the company changed plan administrators. The union employees, however, say the “freeze-out” period lasted longer. In either case, many Enron employees sat motionless while the company stock fell from a high of nearly $90 in August 2000, to $13.81 when the “freeze-out” period began. It declined another $3.83 during the 10 trading days of the freeze.

Moreover, nothing compelled employees to invest 100 percent of their 401(k) plans in company stock. The company offers several different options, enabling employees to diversify.

Also, not all analysts bought the Enron bluster. In March 2001, Fortune magazine writer Bethany McLean wrote, “But for all the attention that’s lavished on Enron, the company remains largely impenetrable to outsiders, as even some of its admirers are quick to admit. Start with a pretty straightforward question: How exactly does Enron make its money? Details are hard to come by because Enron keeps many of the specifics confidential for what it terms ‘competitive reasons.’ … ‘If you figure it out, let me know,’ laughs credit analyst Todd Shipman at S&P. … ‘Enron is an earnings-at-risk story,’ says Chris Wolfe, the equity market strategist at J.P. Morgan’s private bank, who, despite his remark, is an Enron fan. ‘If it doesn’t meet earnings, [the stock] could implode.'”

Perhaps more annoying, the Bush administration proposal likens investing 100 percent of one’s 401(k) plan to that of gambling. Many Microsoft workers, for example, believed in the CEO, the company and its prospects. Several workers decided to throw their whole financial lot in with Gates. They assumed, correctly in Microsoft’s case, that given their youth, if they stumbled they could recover.

In “It’s Getting Better All the Time,” authors Stephen Moore and Julian L. Simon write about a man who never made more than $14,000 a year working at UPS, and enriched himself with the “all-eggs-in-one-basket” approach: “He plowed every penny of savings he had back into UPS stock (he really should have diversified), and when he reached the age of 90 in 1992, he shocked his relatives and friends by announcing that his net worth was close to $70 million.” Portfolio managers strongly advise diversification. Still, should the government say no to those who choose not to?

Such a philosophy made many young multimillionaires all across this country. The Bush rules compromise that dream, and restrains those willing to take such an “investment” or “risk.”

How ironic. These laws stop mutually agreeing employer and employee from reaching an acceptable level of their formula for risk and compensation. Yet many states run lotteries, selling tickets at odds of 100 million to one.

Activists like Reverend Al Sharpton and Reverend Jesse Jackson urge government (read: taxpayers) to make Enron employees whole. The government failed to exercise proper oversight, they argue, therefore taxpayers must pony up. “There must be a commitment by the government to bail them out,” said Sharpton, ” … They can certainly find money for victims who would not have been victimized if the government had protected them.” So, under the Sharpton philosophy, if the cops fail to stop a burglar from stealing your stereo, the government forces your neighbors to pass the hat to buy you a new one.

But does this apply to everybody? After all, 78 National Football League players, according to U.S. News & World Report, lost over $42 million in three years through fraud by trusted advisers. Let’s make them whole, too.

The Enron disaster hurts the movement toward privatization of Social Security. After all, goes the argument, given the “uncertainty of the future,” a government-provided social safety net prevents a mishap, disaster, setback and chaos. But for the risk-averse, what about government bonds or notes? Besides, a government bailout creates other unintended consequences. Why bother watching one’s portfolio? Why bother diversifying? If an investor screws up, just go to the government and demand reimbursement.

By all means, bring charges against the Enron characters who engaged in criminal conduct. But memo to Americans: It’s your money, learn to watch it.