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White House Watch: Pension reform is quietly being retired

Business doesn't really want to change its way of doing business

Sunday, June 02, 2002

By Ann McFeatters

WASHINGTON - If you're feeling mellow and don't want to get outraged, stop reading. Now. This column is about how our retirement savings are disappearing and how the federal government -- and Congress and the White House -- are doing nothing about it.

  Ann McFeatters is National Bureau chief for the Post-Gazette and The Blade of Toledo, Ohio. Her e-mail address is amcfeatters@

After the collapse of Texas-based Enron when millions lost money on its stock and thousands of its own employees lost their 401(k) savings, politicians raced to open microphones to denounce the financial evildoers and vow action. Hearings were held. Americans were promised: "Never again." Legislative reform, we were assured, was just around the corner.

The corner has faded into the distant horizon.

The Senate Banking Committee is no longer actively considering a reform bill to change accounting procedures. The Senate has not even scheduled action on a pension reform bill that would let employees sell company stock, as managers of Enron did while most employees could not, and would prevent companies from offering stock both as a matching contribution and as an investment option.

The House has passed its own bills, to let employees diversify their 401(k) plans and to rein in accounting firms from having conflicts of interest with the clients they audit, but they are completely different from the Senate version. With only a few months before lawmakers go home to campaign for re-election, controversial legislation is doomed. And, without doubt, this is controversial legislation.

Finding out how this happened is enlightening.

It turns out that business doesn't really want to change its way of doing business. The U.S. Chamber of Commerce opposes the reform bills. So does the powerful behind-the-scenes Business Roundtable. So do many other business organizations.

They use the same old shibboleths -- fear of more government bureaucracy, fear of lost jobs, fear of new brakes on the economy. Of course, the Enron disaster such legislation might have prevented was no boon to the economy -- or to thousands of families wondering how they'll survive after 65.

Changing accounting practices is no way to grab the public's attention. And while millions of Americans now have 401(k) plans to which they contribute an average of 8.34 percent of their paychecks, the value of such plans rises and falls regularly (mostly, lately, they fall) and safeguarding them with new bureaucratic rules doesn't seem a momentous need. The death of a few arcane bills on Capitol Hill probably won't bring a groundswell of public protest.

On the other hand, those business groups still are able through the November elections to give politicians campaign donations before the new campaign finance rules kick in. And with control of the House and the Senate up for grabs, those donations matter mightily.

Harvey Pitt became chairman of the Securities and Exchange Commission (another in the myriad of Washington agencies few people really understand) in August 2001. Before taking the position, he was a prominent lawyer in the securities field, giving advice to all the big accounting firms that were glossing over their clients' financial warning signs. He says that Americans simply have to pay more attention to where the money for their retirement is going to come from and that a "massive restructuring" of regulation of the capital markets is vital.

Pitt says companies should have to disclose more true financial information in shareholder reports. He says there should be a new oversight board to govern the accounting industry. He says that top hat executives should have to give back bonuses and stock options and huge salaries for masterminding financial performance that turns out to be a shell game.

Standard & Poor's, the private bond rating agency, Federal Reserve Chairman Alan Greenspan and billionaire investor Warren Buffett are losing patience, saying the accounting industry's standards have to be raised or Americans' disenchantment with the stock market will become a serious drain on the economy.

But Pitt, despite his speeches given in large measure to stem calls for his resignation and hang on to some credibility, still doesn't seem interested in reform any time soon. Some states have more clout than he has, as New York proved in getting Merrill Lynch & Co. to pay a $100 million penalty to avert criminal and civil charges. As with the lost momentum in Congress, the steam also seems to have gone out of the White House's weak drive for change.

We're like Charlie Brown and his gullibility when Lucy holds the football for him to kick -- she always pulls it back at the last minute.

Will we be wondering when we're poor and aged 75 or 85 or 90 why business as usual means that means many of us get, well, taken advantage of?

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