From: Technotranscendence (neptune@mars.superlink.net)
Date: Sat Sep 07 2002 - 13:47:24 MDT
On Saturday, September 07, 2002 2:13 PM Charles Hixson
charleshixsn@earthlink.net wrote:
>> Actually, in most these cases it remains to be
>> proved that people knowingly committed fraud.
>> Accusations aren't enough here. Intent must
>> be proved.
>
> Truth.
I'm glad someone here, aside from me, still thinks that guilt has to be
proven before people are punished.
>> However, yes, if you are right about this, then, yes,
>> these people should be prosecuted. And there's
>> no need for new laws or a vigorous prosecutorial
>> campaign. Also, this should be a basically civil not
>> criminal action. The goal should be to get the
>> money back -- as much as possible -- from the
>> executives found guilty of fraud.
>
> Fraud, conspiracy to comit fraud, grand theft, et
> multitudinous cetera.
All property crimes best punished by trying to restore the victim.
>> Actually, a lot of novice investors think just that.
>> They think that this is how business works. Given
>> the calls for jail time and the
>
> What is the evidence that they are wrong? That's
> the way a lot of business appears to operate. And
> given the difficulty of obtaining evidence, we can be
> certain that a much larger number of crimes are
> comitted than are ever convicted.
I believe you're right here, but what's the solution? More government
intervention or smarter investment -- even if the latter means such
things as not investing in stocks and other securities? (I mean, if
you're no good at picking stocks or you don't want to look too deeply
into a company and you see MSNBC as your only source of business
information, then maybe you should just get a CD or a Money Market
account and stay away from securities. If you are willing to take the
risks of the latter, then be prepared to be deceived and be a little
skeptical. Also, just like playing poker, don't bet the rent money or
the retirement fund. If you're going to gamble, do it with money you
won't miss. If you'll miss it, then don't gamble.)
This is not to say punishing fraud is off the table, but, from an
investor point of view, I'd rather avoid potential fraud then try to
recover from it afterward -- even if this means going for lower risk,
lower return investments. (Regardless of where you stand on policy, you
can at least change your individual investment strategy in light of
Enron et al.)
>> like -- which won't refund any investor money and
>> actually will costs investors more, since they'll be
>> paying for the trials and the prison cells -- I think
>> basically this has turned into a class warfare issue.
>
> Do you honestly think that there's any way the
> investors would be repaid?
It depends on what happened to the money. Granted, no one is going to
get 100 cents on the dollar here. More likely, it will be pennies on
the dollar.
It also depends on whether it was fraud. If I give you $1000 for your
business and you go belly up because you're an incompetent businessman,
then am I owed $1000 here? It's a lot different if you went belly up
because you scurried the $1000 in an offshore account or bought tickets
to the Super Bowl with the money.
And that still remains to be proved. I mean it still remains to be
proved that all these executives really were defrauding people or just
incompetent or just unlucky.
> They have essentially no power and no leverage at
> this point in time. They were lied to, hoodwinked (or
> sometimes coerced)
Where is the evidence of coercion? Indirect coercion, maybe -- that's
what fraud is. However, I don't recall any evidence of Ken Lay or the
others holding a gun to someone's head and telling them to purchase
shares of Enron.
> into these investments. And
> they have no current recourse. Is it your position that
> we should trust the government to handle things
> properly? Perhaps we should, but that's because
> it's the only choice available.
Look, you're hoisting yourself on the horns of a dilemma here. You
don't trust the government to go after fraud, but you do trust it to
what? My solution is that fraud should be gone after, but the much more
important thing is not to increase government power. Let some investors
get burned. Heck, I lost money too. I'll live and I'll learn. But
increasing government power here will most likely only create more
Enrons. (Most people seem to forget that the US government throughout
the 1990s bailed out investors left and right -- in the S&L Crisis,
Mexico, East Asia, Russia, and LTCM. This sets up the expectation that
investments should be no risk but all reward -- and investors never
learn to be cautious, skeptical, and to develop tools to weed out the
Enrons from the Intels.)
>> No exactly true. First, the government did not prove
>> wrong doing before the arrests. Since these guys
>> are not likely to flee and also not
>
> ??? Evidence for this? I know of many cases in the
> past where (on a lesser scope) people who have
> comitted similar crimes have then fled the country,
> taking their profits with them.
Do you seriously think that today with the global reach of the US DoJ
that Ken Lay and his buddies would be untouched anywhere on the planet?
>> violent criminals, the arrests and parading before
>> the media was purely a political stunt aimed at
>> giving the masses circuses when no bread is
>> forthcoming.
>
> Causing people to loose their homes and jobs.
> Purely a stunt, yeah!
It remains, again, to be proved if that's what they did. Would you like
if, say, you were arrested and paraded before the news cameras because
your company went belly up?
Come on, you know the reason they were arrested had little to do with
the nature of their crime and much more to do with making the
government -- a government which commits fraud on a much greater level;
what about the missing $1.7 trillion at the Pentagon? -- look like it's
doing something and that every idiot with some spare change can start
plowing it back into the NASDAQ like it's 1999 all over again.
>> Second, with more government intrusions into the
>> market -- proffered by the myth that somehow
>> before last summer we had total laissez faire
>> capitalism (each new episode of government
>> intervention is always predicated that we had
>> economic anarchy until the new interventions are
>> in place). In this area, there will restrictions on
>> how people can invest, e.g., in 401 (k)s.
>
> The laissez faire market is a myth. The government
> intervenes constantly on the side of large businesses
> and against the customers and the smaller businesses.
> Also against foreign businesses, and that's sometimes
> used as an excuse to justify the former actions.
Agreed. Where do we disagree here? The solution is to reduce
government intervention. People will always try to move to rent seeking
where they can instead of creating wealth to trade. Such people will
always try to use whatever's at their disposal to take rather than make.
Big businesses are marvelous at doing just that -- even when it hurts
them. (Recall, I cited Alexander Tabarrok's "The Separation of
Commercial and
Investment Banking: The Morgans vs. the Rockefellers" in _The Quarterly
Journal of Austrian Economics_ 1(1)
[http://www.mises.org/journals/qjae/pdf/qjae1_1_1.pdf]? He states: "It
should also be noted that in very competitive industries, people will
often do things to hurt their competitors even if it also hurts them.
The separation of commercial from investment banking in American via the
the Glass-Steagall Act of 1933 was more of a feud between the Morgans
and the Rockefellers with the Morgans losing. The Rockefeller banking
interests were hurt too, but not as much." I cited this article in
November of last year and August of this year. This should shatter the
myth that I'm somehow pro-big business. No, I guess it won't because
people assume I am.)
>> New disclosures, too, only add to the myth that a
>> government approval is a substitute for good
>> judgment -- as when people die from FDA approved
>> medication. This only lessens the likelihood that
>> people will use common sense and develop a
>> degree of skepticism when making investments.
>
> I'd like them to give convincing proof that the
> government isn't owned lock, stock, and barrel by
> whoever buys the politicians.
I'm sure there's a large degree of influence and, again, the way to cut
that off is to lessen government power. If there's no power for the
government to set prices, regulate entry into markets, and the like,
then one linkage between money and political power will be severed. It
won't rein in a perfect society, but it will be an improvement over the
current positive feedback loop between business interests and political
machines.
> Because I sure can't
> afford to. Even though they are appearantly much
> cheaper than I had expected. A recent story showed
> that one corp. bought my governor's vote in
> a move clearly against both his prior pronouncements
> and the interests of the citizenry for a mere $200,000
> (approx. I don't remember the exact figure).
Well, if the Media were interested more in going after politicians in
general rather than staying in favor with the Dick Cheneys of the world,
things might be different.
> > I.e., it increases the likelihood of more risk taking in the
future --
> > after all, the government has approved XYZ, Inc.'s statements, so
they
> > must be a good risk -- and further interventions when these go awry.
> >
> > As I said earlier, none of this excuses true cases of fraud, but
fraud
> > enforcement does not require any new laws or new government
agencies.
> > Likewise for avoiding fraud. (Fraud wasn't invented by Enron and
Arthur
> > Andersen, you know?:)
>
> That's true, but do you really have any belief that
> this is about cracking down on fraud. This is about
> increasing government control, and improving PR.
> You don't see the VP being hailed into court, do
> you? But there's certainly clear evidence that
> implicates him. (And, interestingly enough,
> congress is also being quiet about this... probably
> afraid of cross-complaints.)
Again, do we -- or did we ever -- disagree here? My original point was
this is just circuses. I'm aware how quickly the case against Cheney
was swept under the rug. In fact, the September 11th attacks are the
best thing that ever happened to Cheney, since he's gotten a pass on his
past. After all, according to him, we can't criticize our leaders in
this time of war
Cheers!
Dan
See "Form and Content in Poetry: A Reply to Jackie van Oostrom" at:
http://uweb.superlink.net/neptune/Poetry.html
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