America's shareholders, a class that now includes at least half the population in one form or another, are feeling furious and betrayed. Unfolding before them every day is disillusioning news about Enron and other bankrupted companies they once believed would improve their lives and their children's future but now turn out to be riddled with fraud and crooks.
Hardworking investors see their dreams dwindling into nightmares, while wealthy corporate managers escape with enormous unearned rewards. They're beginning to understand that the unregulated free market is no capitalist utopia, but a garish casino where the game can too easily be rigged. The result is a crisis of confidence in the financial markets that may increase the cost of capital and prolong the recession.
Crisis, as a wise man once suggested, also means opportunity. The shock of the Enron debacle has created an extraordinary opening for progressive Democrats, traditionally the advocates of such formerly unfashionable concepts as market regulation and consumer protection, which suddenly are back in raging style.
More and more voters may be inclined to listen to that message. During the boom of the past decade, the market has seen an influx of investors associated with Democratic constituency groups, from women and union members to college graduates and residents of the East and West Coasts. The changing demographic of the financial world and its political implications were pointed out during the 2000 election by Daniel Gross in "Bull Run," an insightful book about the democratization of the equity markets that now appears prophetic.
And although Enron, with typical corporate cynicism, sought to buy influence in both parties, its culture and its connections were overwhelmingly Republican. The image of Dubya and Dick cozying up to Kenny Boy Lay could drive angry voters leftward -- including many who have nominally regarded themselves as "conservative."
There is, however, a problem in this scenario. His name is Terry McAuliffe, and he is the chairman of the Democratic National Committee.
McAuliffe had no connections with Enron, but Republicans are making great sport of his association with Global Crossing, the giant telecom firm whose recent bankruptcy was the fourth largest in U.S. history (and is also currently under investigation by government authorities for alleged accounting irregularities). The tale as told by McAuliffe's critics is simple: Like Global Crossing boss Gary Winnick, and unlike the company's small investors and workers whose stock value vanished, the Democratic chairman walked off with millions. He didn't make as much as Winnick, who took out over $750 million before the firm's implosion, but his $17 million profit wasn't chump change either.
The Washington Times and other GOP parrots have worked hard to portray McAuliffe as one of those insider bandits who cash out just before a company craters. (They've also tried to pin a donkey tail on Winnick, although top Republicans and Bush cronies are prominent on the Global Crossing board, the lobbyists working on its behalf include the former Republican national chairman and the company's contributions were divided almost evenly between the two parties.)
McAuliffe is innocent of any such insider-trading charges. He sold most of his Global Crossing holdings more than three years ago, long before anyone anticipated the companys precipitous dive. Unlike President Bush's father, who gave one speech and was then handed $80,000 worth of Global Crossing stock that reached a value of $14 million at its peak, McAuliffe invested $100,000 of his own money in the company before anyone knew how much it would be worth. He did nothing illegal, as even Republican chairman Marc Racicot recently admitted.
But the absence of illicit dealings doesn't mean McAuliffe and his party have no problems. He acquired his Global Crossing stock through connections with Winnick in 1997, before the company went public. It is hard to believe that McAuliffe's close association with then-President Bill Clinton, as friend and fundraiser, had nothing to do with that inside favor, although he was introduced to Winnick through an investment banker. McAuliffe later arranged a golf date for Clinton with Winnick, who promised to give $1 million to the Clinton presidential library.
Whatever the origins of his good fortune, McAuliffe is an odd spokesman these days for little people screwed over by big bad business -- especially because Global Crossing in some respects seems to have been as abusive toward its employees and other small investors as Enron was. Certainly Global Crossing tried just as diligently as Enron did to buy influence with politicians -- in fact, the telecom company spent more than the energy trader.
McAuliffe made a dicey situation considerably worse with his stunningly stupid remarks during an interview on the Fox News Channel: "I invested in many companies, and I'm happy this one worked. This is capitalism. You invest in stock, it goes up, it goes down. You know, if you don't like capitalism, you don't like making money with stock, move to Cuba or China." A more insensitive and politically inept comment on this topic is unlikely to be heard anywhere outside of a Houston country club or a right-wing think tank.
It is tempting to say that McAuliffe should resign, if only for symbolic reasons. Yet without proof of any wrongdoing on his part, that would be draconian. Nobody is demanding the head of Thomas White, the secretary of the army, who ran one of Enron's most corrupted divisions and came into office urging policies that would benefit his former employer.
But as the chairman of a political party that should stand up for the swindled employees and small investors, in defense of the public pension funds and all the other victims of Enronism, McAuliffe must make amends. He owes an apology to the employees of Global Crossing, who didn't even receive a dime of severance pay. Perhaps he ought to contribute some or all of his windfall profits toward a fund for their benefit.
In the end, however, McAuliffe is only a symbol. It is his party's leaders and legislators who need to reconsider their growing tendency in recent years to coddle big business and deregulate the economy. Those Democrats should look upon their chairman's embarrassment and ponder what may soon be a lost chance to win over a large, motivated, politicized and potentially Democratic electorate.
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