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I’m sitting here watching the

I’m sitting here watching the All-Star game in beautiful Miller Park and thinking about the accounting “scandals” of recent months. Here are my thoughts, for what they are worth:
1) I have an intense personal interest in the subject, since I own WorldCom stock that at one time was “worth” about $70,000 (of course, I paid nowhere near that amount). Now, that stock would maybe buy dinner for my family and a couple of guests.
2) Almost everything that has been written in the newspapers about WorldCom is pathetically stupid. WorldCom did not tank because of accounting irregularities. WorldCom tanked because its business model was flawed and it paid way too much for any number of acquisitions–which was one of the hallmarks of business in the ’90′s. The accounting irregularities–capitalizing expenses–represented management’s effort to hide the bleeding for a while, hoping that the telecom market would turn around. It didn’t. I didn’t lose a nickel because of these accounting issues; on the contrary, they helped give me a window of opportunity of a year or so in which I could have sold my WorldCom stock. Unfortunately, I failed to take advantage of the opportunity and didn’t sell a single share.
3) The crocodile tears shed by politicians over people who ostensibly lost their “life’s savings” by investing in WorldCom (or Enron, Global Crossing or whatever) are likewise absurd. I trust that virtually no one is stupid enough (or greedy enough) to invest his or her entire “life’s savings” in the stock of a single company. I certainly don’t know anyone that dumb.
4) One thing you never read about in the press is investor greed. This is a glaring omission. Give me a break; why do you think people bought telecom stocks at 100 or more times earnings (or far more than that, in the case of WorldCom)? They watched stock prices go out of sight in what everyone knew was a speculative bubble. While the prosperity of the ’90′s was not a fiction (just as the prosperity of the ’80′s was real), the stock inflation of the late ’90′s–unlike the comparable gains of the ’80′s–was a hoax, and everyone who had any sense knew it. People who bought Yahoo at 75 knew perfectly well, unless they were brain-damaged, that the stock was not worth anywhere near that amount, but they figured that since the last guy who owned it made money going from 50 to 75, they would likewise make money on the next run-up. These people may as well have been buying tulips. If they lost money, they were victims of their own greed.
5) Fraud is not a new phenomenon. It has existed from more or less the beginning of time and has been illegal for centuries. The last thing we need is more statutes making fraud even more illegal than it was last year. Existing statutes are more than sufficient if they are enforced, kind of like guns or campaign finance.
6) I have no sympathy for corporate executives who commit fraud. However, they could be worse: they could be involved with Social Security. Social Security has been a fraud from the beginning; if Franklin Roosevelt had been a private stock promoter, he would have gone to jail for telling people that the money they paid in Social Security taxes would go into an “account” that corresponded to their “Social Security numbers,” and would be saved for them until their retirement. Until recently, a great many people actually believed that somewhere they had a “Social Security account.” Today, politicians who encourage people to rely on Social Security, and who condone mass mailings by the Social Security Administration telling workers (like me) how much they can expect to receive when they retire, are committing a colossal fraud. They know perfectly well that there is no assurance whatsoever that Social Security payments will be made, since the amount (if any) of such payments is entirely discretionary with Congress. They know equally well that the money will not be available in twenty to thirty years to pay the amounts currently expected by those who pay into the system, whose money is gone forever, wasted mostly on silly social programs. This is a scandal that dwarfs anything perpetrated by WorldCom and Enron and Global Crossing, and the very same Congressmen who demagogue “corporate corruption” are perpetrating it.

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