Friday, August 23, 2002

As Dubya's administration pushes hard for more investigatory power with less accountability, here's a pretty little note: A report from the secret court which was set up to authorize wiretaps for intelligence purposes, saying that even under Clinton, it was routinely and systematically misled by the FBI.

The Foreign Intelligence Surveillance Court actually has a reputation, particularly among left-wing critics of government abuse, as being something of a rubber stamp. But apparently, last year, its judges were complaining bitterly that they had been misled by the FBI regarding its investigations of Hamas --- specifically, that officials up to and including Louis Freeh had point-blank lied about whether the proceeds of the intelligence wiretaps were going to be (illegally) used for criminal prosecutions.

The FBI spin on this is, "Well, that was the last administration. You can trust us." (And indeed Ashcroft's crew has backed off from improper prosecution based on intelligence wiretaps --- their style runs more toward indefinite detention without trial). But the FBI is also shucking and jiving that the court's response to their poor judgment regarding the Hamas investigations, and the court's resulting ill humor, "explains" their poor judgment in refusing to even ask the court for a look at the contents of Zac Moussaoui's hard drive before Sept. 11th.

All of which goes to show that the FBI is broken, and needs to be fixed. And that, John Ashcroft to the contrary, accountability in government is not necessarily a bad thing.

It's not a great time to be a former executive of Enron. Even George Bush's FERC has conceded at this point that your company seems to have gamed the California energy markets. One of your colleagues, Michael Kopper, has just confessed to being the personal beneficiary of over $10 million in fraud. The SEC has frozen the bank accounts of your former CFO and many of his friends and family, based largely on the song of the stool pigeon. And just today, another former colleague was arrested in Britain on charges involving a $1.5 million bribe.

And so these poor folks (remember Linda Lay's thrift shop?) pan their river of woe for a sliver of hope. Jeff Skilling is now reportedly haunting tony Houston bars, drowning his sorrows in white wine and gin, asking anyone who will listen, "Do you believe me? Do you believe what I've said about Enron?" What he really needs is a way to exploit emerging technologies to energize and streamline his search. For the people he seeks are right out here on the Internet, starting with the Pharoah of Denial himself, Robert Musil.

For as soon as reports of Kopper's plea hit the wires, Musil hit the net, breathlessly talking down the news. Perhaps the prosecutors were not demanding Kopper's cooperation, but just giving him a plea bargain out of the goodness of their hearts?

According to Associated Press, "As part of the plea agreement, Kopper has agreed to cooperate with investigators, a potential watershed event in the investigation since he has knowledge of Enron's innermost workings and financial dealings." But another Associated Report says it is not clear whether he has agreed to cooperate.

In fact, Kopper will be cooperating so closely with the prosecutors from here forward that, in an unusual move, he's ceded the right to have his own lawyer present at their meetings. (But then again, as one Houston lawyer ruefully notes, he no longer has the money he'd need to pay his lawyers anyway).

But that's not the important thing here. Here's the important thing:

Of course, the important thing here is whether these charges of crimes against Enron can be leverged though witness cooperation or otherwise into successful charges of crimes by Enron or its officers against the investing public.

What a precious distinction. Never mind that Kopper was an officer of Enron. Consider the role of the "investing public", i.e. the shareholders: not victims, but merely bemused observers as the corrupt machinations of Enron executives sent the company, and their retirement savings with it, down the toilet.

It is also interesting that Mr. Kopper is not pleading guilty to accounting, securities or bank fraud, which are the principle allegations against Enron and its operatives. But that may just be part of his deal with the prosecutors.

Never mind that the government's theory of the case, which Kopper must agree to entirely as part of his guilty plea (viz. Zac Moussaoui's recent lessons at the Leonie Brinkema school of law) is that the SPE's which Kopper looted were set up in the first place to cook Enron's books.

And beyond that, never mind that up until Kopper's plea, the "important thing" regarding Enron on Musil's blog was the lack of indictments, which supposedly indicated that the feds had no evidence of any crime. In fact, it's now pretty clear, they were playing off several Enron officers against each other, looking for the best plea deal. (There were reports of discussions with Fastow, Ben Glisan, and others). And they got a doozy --- the best hope for folks like ex-CFO Fastow was that their accounting structures were so complicated that a discussion of their intricacies would put a jury to sleep. But Kopper's testimony about easily-understood matters such as "kickbacks" and "bribes" will more than likely keep them awake long enough to vote "guilty".

The only thing we haven't seen yet is direct evidence of culpability by members of the board, particularly Ken Lay himself --- a matter of some political import. Remember, Dubya relied so closely on his friend "Kenny-boy" in the formulation of energy policy that Lay, not a formal member of the government, pretty nearly had hire-and-fire authority over the membership of the Federal Energy Regulatory Commission --- the government body tasked with regulating Enron. So it certainly makes a difference whether Ken Lay was a fool or a crook. But the choices now come down to that, and neither reflects well on Dubya's judgment.

(Update: Musil blows another gasket; my further response)

Wednesday, August 21, 2002

Everyone else is blogging John M. Ford's brilliant poem about Sept. 11th, 110 stories, but I've never been one to run with the crowd here, so I'll instead blog Christine Quinones's work on the more quotidian woes of contemporary New York:

Sonnet: A Valediction, Against Flushing

The fundamental errors in the field,
The bats as cold as February snow,
The pitching inconsistent and too slow --
Have reaped a last-place standing as their yield.
A fate of autumn off is all but sealed,
So they go out and lose eight in a row.
The fans who still have hope believe, but know
How hearts with bitterness become congealed.

Come on, Mets! You make Tampa Bay look good!
You're living proof a pennant can't be bought.
Bud, why contract the Twins or Montreal?
Amazin'. They're professionals -- they should
Survive. Break up the Mets! They're all for naught.
It's over, guys. Let's go. Enjoy the fall.

Christine, you have the soul of a Red Sox fan. (They're ruinin' my summah! Again!)

James Kenneth Galbraith reviews a few books on America's economic policy towards Russia over the past decade or so. His review often echoes other critiques, as when he says:

The preconditions for a successful market economy did not exist, nor could they be created in any reasonable time. Indeed, as Granville and Oppenheimer point out, they were contradictory. Both property rights and competition are necessary in principle, but an antimonopoly policy would, in the specific circumstances, have simply undermined property rights. The result was that monopolization went unchecked, competition could not emerge and private-property rights became merely a cover for asset stripping, looting and capital flight.

and when it stresses the dogmatism of the advocates of radical Russian reform...

Western reform failed in Russia not only because the recommendations were inappropriate to Russia,but also because they were based on a caricature of economic governance in the "free-market" West. It wasn't merely that the outside advisers did not understand Russia; they weren't very good at economics.

... a point not lost on even Michael Gorbachev, who recounts that at the 1990 G-7 meeting:

I was struck in particular by Japanese Prime Minister Toshiki Kaifu. One could have imagined that his remarks were from the representative of a country with no government economic regulation. Similar views were expressed by U.S. President George Bush, Canadian Prime Minister Brian Mulroney, and British Prime Minister John Major. ...

But it adds a glance at the intellectual failures of American political leadership, as seen in, for instance, Clinton's Russia hand, Strobe Talbott:

Talbott shared with Clinton a tendency to view diplomacy in terms of contests and teams. Friends had to be supported, their adversaries opposed. This meant in practice that support for Boris Yeltsin took precedence over policy, time and again. (On one occasion, to make the metaphor explicit, Talbott finds Clinton watching a Yeltsin speech on one television and an Arkansas Razorbacks game on the other. "You know who I'm rooting for, in both cases," the president explains.) When an honest old Soviet, Georgi Arbatov, aligned with Yeltsin's opponent Ruslan Khasbulatov in 1992, "spewing accusations about how the government was bankrupting the state and beggaring the people," Talbott was "saddened." That the accusations had merit did not enter his mind, even though he could see for himself (and says so) that inflation was running 2,500 percent per year, with "devastating" effects on consumers and pensioners (that is, on all ordinary Russians).

As Galbraith goes on to explain, economic "reform" seems to have been actually killing the people --- the death rate shot way up, perhaps due to the collapse of the health care system.

But Talbott was also blindly devoted to the radical reform program, at one point explaining to Viktor Chernomyrdin that the radical reform principles, as reflected in the IMF's lending rules, "were a reflection of the immutable principles of economics, which operated in a way similar to the rules of physics". Physicists wouldn't dream of using their techniques to model the behavior of systems as complicated and unpredictable as people, but economists are just that much smarter... (Update: corrected attribution, to Galbraith fils, not père. Ooops --- thanks to a correspondant).

Tuesday, August 20, 2002

Jim Henley reports that noxious monopolist Clear Channel is brokering private concerts from several music acts. On the menu: Tracy Chapman for $200,000. (Not mentioned is whether that's a real market rate, or "Yeah, suuure I'll play somebody's party, if you can find someone who'll pay $200,000").

Not too long ago, the rate was $1.00 on a Harvard Square street corner, on the honor system. Perhaps Brad DeLong shouldn't be so worried about deflation...

Monday, August 19, 2002

A quickie while dealing with further hardware problems: Gary Farber thinks Joe Biden is out to prove that Democrats can be as dismissive of civil rights as the most callous Republican.


James Exon, the former Democratic senator from Nebraska proved the point well enough some time ago, when he spearheaded passage of the dismal Communications Decency Act. And Bill Clinton himself was viewed as a major disappointment by many civil libertarians.

But I somehow must have missed the stories about Clinton suggesting that the right of habeas corpus can and ought to be suspended for American citizens based solely on content-free memoranda from some anonymous bureaucrat on the DOD, with no right of judicial review...