WASHINGTON – Government already controls how I can
invest my money, starting with the double taxation of
my earnings – first on my income and then on the
interest or capital gains I earn on that remaining
income.
It also deducts 6.2 percent from my paycheck, and
forces me to invest that portion in Treasuries that
yield a puny 1.5 percent.
And I’m not free to invest whatever disposable income
I have left in a private retirement account, because
Washington caps such contributions.
Now, because Ken Lay turned his gas company into an
off-shore casino and gambled away the stock his
employees had most of their pensions in, all workers
with pensions may be forced to diversify their
holdings (and everyone can forget about shifting part
of their Social Security withholdings into stocks;
that idea is as dead as poor Cliff Baxter, the
outspoken Enron executive who apparently killed
himself).
Congress thinks Enron pension-holders, some of whom
lost millions of dollars from the stock’s death
spiral, had too many company shares in their
retirement accounts. They were “overexposed,” so
Congress wants to limit the amount of company stock in
everyone’s pensions. (Next, Washington will be picking
our stocks for us.)
But what if you work for a well-run company – one
like Wal-Mart or Home Depot with real products and
hard assets that can be accounted for – and you
want to be overexposed to its stock? Shouldn’t
you be able to load up on those shares, put all your
eggs in that strong basket?
Of course you should. You’d be stupid not to,
especially if you got started late saving for your
nest egg and missed out on early compounding. The goal
is to get maximum return on your money so you can
retire early and comfortably, and a company that
averages double-digit returns year after year should
be an increasing, not decreasing, part of your
portfolio.
But by limiting downside potential, Congress would
also be limiting such upside potential. The last thing
we need is egalitarianism in investing.
And, shouldn’t workers be encouraged to take as big a
stake in their companies as possible? I thought that
was the whole point of employee stock-ownership plans.
Never mind, it doesn’t matter. Regulation-happy
statists like Rep. John Dingell, D-Mich., are foaming
at the mouth at the prospect of slapping new rules on
us over the Enron scandal.
But brace yourself. The coming regulatory overreach
won’t be limited to your investment options. It will
likely hit industry hard, raising costs, trimming
profits and depressing Wall Street – and ultimately
your retirement accounts.
Remember, it’s an election year, and lawmakers here
are tripping over themselves to sponsor any
legislation to look like they’re doing something to
“reform the system,” even if Enron’s wounds were
self-inflicted and not symptomatic of any market-wide
or even industry-wide breakdown.
Yet several industries are being fitted for new red
tape, including energy, accounting, consulting,
banking and securities.
Wall Street is already jittery, and not just over news
that creative accounting may also have been used by
Worldcom, Global Crossing and possibly other
telecommunications companies to claim virtual profits
and hide debts.
The markets also fear the wrath of overzealous
regulators, some Republicans among them, who don’t
trust the markets or business, and view Enron less as
an isolated tragedy than an opportunity to burden all
companies – even good, innocent ones, if need be –
with higher costs and more red tape. To them, fault
for Enron’s collapse lies with an under-regulated
market economy, not just Lay and other corrupt crony
capitalists operating in Houston’s oil-igarchy.
Only, the market’s self-regulating mechanism worked. A
bad company failed.
The problem isn’t too few regulations. It’s too many.
There are so many laws and rules now that CEOs like
Lay in heavily regulated industries like energy, or
telecom, feel compelled to buy off politicians to
navigate around the red tape. It’s no excuse, but it
is reality.
Look, whenever politicians do something for the sake
of doing something, like they’re poised to do now,
watch out. It usually means they will pass onerous new
laws that will cause a different kind of business
scandal or crisis down the road, which will trigger
new laws to correct the old laws, and so on.
And more laws mean corporations and industries will
send more lobbyists and donations here to change them
in their favor. A new Enron will be right around the
corner trying to game the system.
As big business and big government become more
intertwined in this way, the kind of crony capitalism
we abhor in Third and Second World countries – where
good connections trump good ideas, and political
bribes create or protect markets – will become all
the more common in this country. And that’s the real
scandal.
Lawmakers can always just do nothing in the way of new
legislation, treating Enron as the rogue operator it
is and embarrassing its rapacious and spineless
executives in televised hearings. They can even refer
some of them to the Justice Department for indictment
if they come across evidence of crimes.
But they won’t.
Members of Congress – who, tellingly, exempt
themselves from many of the rules they saddle us with
– will no doubt pass knee-jerk, one-size-fits-all
regulations to rein in the “culture of corporate
corruption” many of them think stretches beyond Enron.
Sadly, they’ll only end up punishing all corporations
and their workers for Enron’s mistakes.
