Enron Corp.'s failure has smudged the public image of capitalism.
It has left Wall Street "with a couple of black eyes," says William Freund, a former chief economist for the New York Stock Exchange.
Critics talk of "crony capitalism." Corporate executives are being seen more often as rascals, not the touted heroes of the 1990s New Economy.
Observers suspect that the deregulation movement of recent decades could be replaced by a re-regulation era. Washington might move back partway toward the strong business and financial regulation that Franklin Delano Roosevelt won in reaction to the Great Depression and the business scandals of the early 1930s. At the least, deregulation may experience a lengthy pause.
The Amercan corporate system has usually been ranked as having transparent and honest accounting. It was believed to suffer from relatively little inside dealing when compared to many other rich nations. Many shareholders now wonder if those standards were weakened in the go-go 1990s.
Enron is even raising old questions about the fairness of the free-enterprise system. Its high rewards for top executives and losses for the rank and file raised eyebrows.
Conservatives, perhaps even more than liberals, are troubled by the Enron scandal. Some see Enron as an enemy of capitalism, damaging the free market.
"Being pro-business does not include condoning ... abuses which, if left unattended, would bring down the very free-market capitalist system that we cherish," notes Lawrence Kudlow, a Wall Street economic consultant. He credits this system, the rule of law, and "presumably" inhabitants of strong moral character with enabling the US to be "the most prosperous nation on the planet."
Many liberals would welcome better controls over business.
"It will be good in the long run, but messy along the way," says Alan Blinder, a former Federal Reserve governor and now an economist at Princeton University in New Jersey.
"It is going to lead to all sorts of new regulation - and properly so," predicts Alfred Kahn, an economics professor at Cornell University in Ithaca, N.Y., who helped deregulate the trucking and airline industries years ago.
The 1930s reforms included creation of the Securities and Exchange Commission and the passage by Congress of the Public Utility Holding Company Act.
The newborn SEC required regular reporting of corporate news, including annual reports, and audited earnings statements. The utility act prohibited the pyramiding of holding companies to obscure business realities, much like Enron's multiple off-the-books entities.
Such reforms "may have saved American capitalism," says Richard Hirsh, a historian at Virginia Tech, in Blacksburg, Va. They established a fairer and more level playing field, giving investors confidence in the firms in which they put money.
Jerry Taylor, director of natural resource studies at the Cato Institute in Washington, charges Enron with being "a pro" at "regulatory opportunism." The firm sought competition and "choice" for natural gas and electric services when they were in its favor, he says, but upheld regulation when they helped Enron.
President Bush has had little to say about Enron. He has called it "a business problem that our country must deal with and must fix.... This is not a political issue."
Democrats are happy to note, though, that Enron has given more than $700,000 to Bush since 1993. No company has given him more.
Altogether, 11 House and Senate committees are investigating the Enron debacle, as well as the SEC and the Justice Department.
Out of all this will come many touch-ups to capitalism.
The thrust toward deregulation of electricity has probably stalled in many states.
Republican efforts in Washington for "tort reform," aimed at easing the burden on business of numerous lawsuits, has been set aside for now.
Experts foresee tighter corporate accounting standards.
"From henceforth, accounting practices will be a lot more conservative and ... sounder," says Dr. Freund, now director of a securities-markets research center at Pace University in downtown Manhattan.
Treasury Secretary Paul O'Neill calls for stronger penalties for chief executives who release misleading financial statements. To prevent conflicts of interest, major accounting firms have announced they will no longer sell consulting services to companies they audit.
Rules for 401(k) plans will be altered to assure greater investment security for account holders.
Campaign-finance reform, boosted by the Enron scandal, may trim the influence of big money in Washington.
A bill in Congress would force companies that issue stock options to executives to deduct the options' costs as they would an employee expense. Since options have been the biggest factor behind an big rise in CEO earnings in recent years, such a change has the potential to shrink the wide gap between executive pay and the wages of workers in corporations.
It could also make it less attractive for executives to pump up the value of their firms' stock.
Proposed new rules would require market analysts to provide investors with more information about how they are paid.
The rules would also limit the extent to which analysts can trade shares of firms they write reports about, and prevent research departments from being controlled by a firm's investment-banking operation.
If an analyst slams a company in a research report, investment bankers at the same firm may be unable to get that company's underwriting business, that is, selling new issues of bonds or stocks.
Stock-market analysts may pay more attention to long-term, fundamental values of a corporation, and less to whether its earnings are merely predictable, says Bradford Delong, an economist at the University of California, Berkeley.