[Congressional Record Volume 148, Number 100 (Monday, July 22, 2002)]
[Senate]
[Pages S7132-S7134]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CORPORATE AMERICA
Mr. REID. Mr. President, flying back here last night from Nevada, I
spoke with two flight attendants. Usually they talk to me about working
conditions, air marshals, or something dealing with their job. But they
were concerned about corporate America. They talked to me two separate
times. In effect, they said: This is a disgrace. I hope, Senator, you
are doing something about it.
This morning when I was at the doctor's office, I had another
conversation about the problems in corporate America. Because of my
light complexion and having been raised in the desert sun, I on
occasion have had a dermatologist take little things off my face, and
today was one of those occasions. While I was waiting for the
physician, a nurse approached me, and said: Senator, I hope you do
something about what is going on in America today. These scandals in
the corporations are outrageous.
Everyone in America is concerned. I was in Nevada this weekend, and
five or six different people came to me on different occasions, talking
not about the things I would normally expect upon returning to Nevada,
but about corporate America and what is going on.
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We are debating a bill that directly deals significantly with
corporate America: Pharmaceutical companies. We have been told in the
debate the average CEO of a pharmaceutical company in America makes $27
million a year. Pretty good change.
This debate deals with generics, it deals with prescription drugs, it
deals with patents on medicines, but it also deals with corporate
America.
In response to the crisis of confidence that has plagued American
investors, the Senate has responded forcefully. The majority, the
Democrats, have led the way by drafting important legislation to close
loopholes and bring about more corporate accountability. The Senate
unanimously passed an accounting reform bill that protects investors
and punishes corporate criminals. The Republican leadership in the
House led an effort to pass a watered-down version that does not go
nearly far enough. I am encouraged by reports that many in the House
support the stronger policies the Senate passed, and I hope the
legislation that comes out of the conference is one that has the
Senate's mark on it. I am looking for the President to come forward and
support our position.
Over the weekend, again, he said, please, give us a bill before the
August recess. What bill does he want? Does he want the nothing bill
the House has, or is he willing to come forward and talk about the
Sarbanes version of the legislation, which is strong legislation, which
would restore confidence, so that flight attendants and nurses are not
worried about corporate America?
Nevadans are significantly impacted by the downturn in the financial
markets. People in Nevada count on their investments to help meet their
current daily expenses and plan for the future. That is the way it is
all over America. Nevada's high quality of life has attracted many
retirees. But many have seen their life savings evaporate as stock
prices fall. As accounts have dwindled in the last 4 or 5 days we have
heard people saying they wished they had never gone into the stock
market. They are checking out. Nevada workers nearing retirement face
uncertainty about their ability to stop working because they no longer
can afford to do so.
We have seen the cartoons around the country asking why this person
is working so long, and the cartoons indicate: I invested in the stock
market, and I have to work until I'm in my nineties.
College plans for students in Nevada are now in jeopardy because
family savings have disappeared.
The collapse of Enron--taking just that one scandal, because there
are many others--has had a ripple effect that has caused economic
difficulties and threatened the health of Nevada generally. The State
public employees retirement pension fund lost almost $23 million
invested in Enron. That is a lot of money for a small State such as
Nevada. Thousands of Nevada's dedicated public servants who worked hard
and saved and invested responsibly have seen their investments erode to
satisfy the greed of corporate fat cats.
In addition, look at the trauma center at the University Medical
Center in Las Vegas. Las Vegas is now a major metropolitan area. About
1.5 million or 1.6 million people live and work in that area. The one
trauma center where they took care of the accident cases and took care
of the indigent patients, basically, in Nevada--it serves a huge number
of people; it is one of the busiest in the country--has been forced to
close temporarily and faces a very unsure future.
Why? Because of corporate America. This is linked to the Enron
scandal because the Medical Center's insurer, St. Paul, lost $108
million invested in Enron. That is five times as much as the total cost
for medical malpractice payouts in Nevada. As a result, St. Paul has
raised premiums for malpractice insurance to such an extent that many
doctors have elected simply to leave the State.
We have one physician who is going into long-haul truck driving. And
many doctors have elected not to work at the trauma center.
Going to a little different subject, it is hard to comprehend that
these insurance companies get away with as much as they do. There is no
other business in America that can meet--not secretly--and fix prices.
Because of the McCarran-Fergusson legislation passed during the
Depression, insurance companies are not bound by the Sherman Antitrust
Act. They can meet to set prices to run people out of business. It is
not against the law, civilly or criminally.
I am deeply concerned about the problems caused by scandals in
corporate America and their far-reaching effects. I want to make sure
the President responds appropriately, or tries to. Unfortunately, the
administration so far has not provided the reassurance the public
seeks. It fails to demonstrate leadership on this issue.
Let me be clear, the crisis in investor confidence is in danger of
spreading. I don't know what is going to happen today, but I saw an
hour ago the Dow was down 258 points again today. Maybe it will have a
rally in the next hour or 2 and be fine, but that is what I saw.
The crisis in investor confidence is in danger of spreading,
potentially crushing consumer confidence and reducing consumer
spending, and that is all we have going. If we reduce consumer
spending, that would be devastating in the country. The climate of
scandal is linked to the administration in this way. I think how the
President responds also is important. I do not think he has responded
appropriately.
He has given a speech. You could see the stock market dropping as he
was speaking. That is what the TV stations did. As he is speaking about
consumer confidence, the stock market is reeling backwards.
Among the steps the President must take to resolve the crisis in the
financial markets and to restore confidence is to replace, in my
opinion, key members of his administrative team who cannot be effective
in bringing about necessary changes. In Government, we not only have to
do what is right but what looks right. We have to not only do what is
right, but what appears to be right.
The Securities and Exchange Commission is the main regulator of
America's financial markets. The President chose Harvey Pitt, who
aggressively defended the big accounting firms and corporate America
and represented the lobbying group for the big accounting firms, while
he being confirmed as Chairman of the SEC, the agency that is charged
with investigating the same accounting firms involved in the scandals
that rocked the stock market and hurt millions of America's investors.
It is trite, but it seems to me it is installing the fox to protect the
hen house.
Mr. Pitt set the wrong tone from the beginning, suggesting he would
have the SEC be ``kinder and gentler.'' Kinder and gentler? One of his
former clients is Arthur Andersen, a firm implicated in so many
unfolding scandals that major magazines have reported they no longer
have anyone working there.
Is Mr. Pitt really the right person to investigate Andersen,
implement charges, oversee them and enforce regulations? Those flight
attendants I met last night, and the nurse today, I think would say: He
wants a kinder, more gentle SEC? I don't think so.
He has already had to recuse himself from more than two dozen SEC
investigations, but he did not see anything wrong with meeting
privately with the incoming chairman of KPMG, another former client,
when his firm was under investigation for its accounting work with
Xerox.
The SEC needs a new leader, somebody free from conflict of interest,
who recognizes how damaging even the appearance of conflict of interest
is at this sensitive time for America's financial well-being. Neither
the American public nor responsible business leaders have confidence in
Mr. Pitt's ability to serve effectively.
The Wall Street Journal, among other respected voices in the
financial community, has expressed the need for a replacement. You
cannot say the Wall Street Journal is some left-leaning, left-wing
organization opposed to business. Quite the contrary. But they say he
should be replaced.
A growing number of my colleagues in Congress, both Democrats and
Republicans, have indicated it is time for him to go. So I join with
them in calling on Mr. Pitt to resign or for President Bush to replace
him. It would send a strong message to Wall Street, to the people who
work for the corporations in Wall Street, the people who
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earn a living making that stock as valuable as it is.
I am also troubled by the Secretary of the Army, Thomas White, who
testified before the Commerce Committee last week about his role as
vice chairman of Enron Energy Services. Those who observed his
testimony can only be disturbed by his performance. Memos written by
Enron lawyers in the year 2000 suggest that the division of Enron led
by Secretary White at the time overstated the demand for power so that
another division could benefit from artificially higher prices. As a
result, Enron raked in obscene profits while consumers paid billions of
dollars in excess.
It was all phony accounting, a manipulation, by an organization led
by the Secretary of the Army.
Enron's manipulation of California's energy markets affected the
entire western United States. It affected Nevada adversely, driving
Nevada's utilities to the brink of bankruptcy and forcing consumers to
pay skyrocketing rates.
Secretary White received approximately $50 million while at Enron--
he, personally--and he made an additional $12 million after he joined
the Bush administration by selling Enron stock following 77 phone calls
to his former colleagues at the company.
During the questioning by Senator Boxer and others he claimed: Well,
I was just seeing how my friends were doing.
He made $12 million, made 77 phone calls. It just doesn't look right.
The New York Times reported that last December the Army, which of
course reports to Secretary White, granted a sweetheart deal to KBR, a
division of Vice President Cheney's former employer Halliburton,
``despite being a reputed bill-padder and the target of a criminal
investigation.''
I don't know what Secretary White's total involvement in these
dealings might be. I hope neither he nor any of the administration
officials being investigated is guilty of any criminal wrongdoing. But
it is obvious that he cannot be an effective leader if he doesn't have
the confidence of the American public, the airline steward or
stewardess or the nurse. It would be in the best interests of our
country and the administration if he resigned.
We in Government not only have to avoid what is wrong but also what
looks wrong. With the Secretary of Army it looks wrong. With the head
of the SEC, Harvey Pitt, it just doesn't look right.
The PRESIDENT pro tempore. The senior Senator from Utah, Mr. Hatch,
is recognized.
The Economy
Mr. HATCH. Mr. President, I have been listening to the assistant
majority leader. I was very interested in his remarks. This President
has been in office less than a year and a half. It does seem to me that
the problems we have in America are problems for everybody--not one
party and not one President. They are problems for all of us.
I have to say I think this President is doing everything he possibly
can to try to stabilize this economy and get us through these
difficulties. Certainly the economy is doing well. We have 3-percent
productivity growth, which is better than the whole time between 1980
and 1995. There are a number of other things which show that we have a
strong economy.
But this underlying illness that afflicts the stock market is hurting
everybody. I suspect part of that comes from what has gone on over the
last 10 years or so and not just in the last year and a half. There has
been a lack of confidence in our business community because of those
who have been committing these heinous acts of misrepresentation and
fraud in some of these major corporations in America. There have been
relatively few. And I see that other corporations are scrupulously
going over their books to make sure they are toeing the line in meeting
the needs of the American stock market.
I suspect we are going to come through this within the next couple of
weeks, and when people start to realize that our economy is good and
that we are going to come through this, we will be OK. But I think it
may be a little unfair to suggest that it is basically all this
President's fault or that it is all one party's fault. We all have
things we could have done better. We all have some responsibility.
I believe our current President is doing an excellent job. As
everybody knows, I stood up for the prior President when I thought he
was right.
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