The best economic stimulus that Washington could provide now is to quickly restore investors' faith in the financial numbers of American companies.
Suspicions are spreading that Enron-like tricky transactions are commonplace among similar large firms. Investors might stay away from the stock market if Washington doesn't soon correct rules that should force companies to be more transparent and honest in their financial dealings.
Instead of grandstanding on Enron's political ties to the Bush and Clinton administrations, Congress should move soon to tighten up laws governing the world's largest financial industry.
Fortunately, that system is healthy enough to have exposed Enron's dealings and collapsed its Ponzi-like schemes. But with its bankruptcy came the discovery of Enron's labyrinthine structure of partnerships, set up to hide debt and inflate earnings. The possibility that its covert methods are not unique has marred the integrity of a financial system that's become extremely sophisticated in stretching the rules.
Much of the fault lies with Congress and various administrations which, through the 1980s and '90s, were not diligent enough to stop businesses from concocting clever ways to conceal debt, jack up stock prices, and evade taxes with dubious means.
Congress itself has been too willing to take campaign contributions from corporate lobbyists who often have used their influence to block government oversight of their businesses. Stockholders, the ones who risk their money to help the economy grow, too often get overlooked.
Enron was obviously not alone in using shaky financial dealings. For instance, in the early 1990s it and other corporations started to use a type of security originally called Monthly Income Preferred Shares, which is still legal and can be viewed as either debt or equity. This chameleon-like financial tool, created by investment bankers, helped Enron embark on a joy ride of massive borrowing and debt obfuscation.
The IRS and Treasury Department took exception to this financial sleight of hand, but their efforts to stop the spread of such securities faced determined resistance from Wall Street and its political allies, and ultimately failed in Congress. At the same time, corporate executives and big accounting firms were pushing hard for new legislation to shield them from shareholders' lawsuits.
The legislation passed, making accountants and company officers less accountable for bad numbers and bad financial projections. That law, along with nimble debt-shifting practices, now merit a hard look.
With most adult Americans now holding stocks and bonds, the nation has an ever-more-critical stake in up-to-date governance of its fast-moving corporate and financial world.
Congress has failed its stakeholders as much as Enron failed its stockholders and employees.