[Note: This one's a little longer than usual, for obvious reasons...]

Remember last winter when President George W. Bush defused rising concerns about the Enron scandal by telling reporters that he was upset that his mother-in-law had lost $8,000 in her retirement portfolio on her Enron stock? And how, at about the same time, Democrats muted their criticisms and holstered their legislative pistols because it turned out that Democratic National Committee chairman Terry McAuliffe had turned a $100,000 investment in Global Crossing, another firm that practiced fuzzy bookkeeping, into an $18 million personal profit?

Now that those quaint old days are behind us, this seems as good a time as ever to attempt a fuller accounting-if you don't mind the pun-of which corporate interests bought what from government, and just how badly the rest of us got ripped off.

Start with three legislative and regulatory changes, engineered by big money from the securities, high-tech, and accounting industries, that unleashed the wave of "infectious greed" now decried by Alan Greenspan. First, take the treatment of stock options. When the Financial Accounting Standards Board, back in 1994, was preparing to rule that the granting of such options be treated as a company expense-a step that would have reduced corporate earnings and thus deflated stock values-the Senate passed a non-binding resolution sponsored by Senator Joe Lieberman (D-CT) calling on the board to back down, which it did. The high-tech (computers and Internet companies) and securities industries, which pushed hard for this, have poured $346 million into congressional coffers since 1989. Lieberman ranks high as a beneficiary of their largesse: Over his lifetime he is #13 among his Senate colleagues for contributions from the securities and investment industry, having collected $652,000; and has gotten more than $101,000 from the computer industry.

The ability of companies to dispense options without having to account for them led to an explosion in executive compensation and gave top corporate officials a big incentive to artificially inflate their stock prices. Even now, as Congress races to enact a corporate accountability bill, stock options apparently are considered untouchable. President Bush failed to mention them in his Wall Street speech, and Senator Majority Leader Tom Daschle (D-SD), twice used parliamentary rules to block a vote on a proposal to force companies to count them as a real expense. Stock options proponents like Lieberman, and Silicon Valley venture capitalist John Doerr, who with his wife Anne has given $619,000 to the Democratic party and its candidates since 1999 according to USA Today, claim that millions of workers benefit from "owning a piece of the company." In fact, according to the National Center for Employee Ownership, the top five executives of most companies held 75% of all options outstanding in 2000, with the next fifty executives holding another 15%. Only 1.5% of all non-executive employees earning between $35,000 and $50,000 have any stock options, and usually the number of shares involved is minuscule.

Another legislative decision that fostered corporate greed came in December 1995, when Congress overrode President Clinton's veto of a bill that made it harder for shareholders to file and win lawsuits against company officials or accountants, and made it easier for top executives to get away scot-free with making slippery financial projections. The bill, known as the "Private Securities Litigation Reform Act," came to the fore as part of Newt Gingrich's "Contract With America," but it had bipartisan support, especially from Democratic Senator Christopher Dodd of Connecticut, who was then also the chairman of the Democratic National Committee. Among the law's major provisions: companies would be shielded from liability for making overly optimistic "forward looking statements" in their pitches to potential investors. In other words, a company could make all sorts of claims about its rosy future, and, as long as it included a blanket disclaimer along with the statement, it couldn't be held liable. Accountants were perhaps the biggest winners in the law, beating back an attempt to reinstate liability for those that "aid and abet" securities fraud.

The law's supporters said it would cut down on frivolous securities lawsuits. But a long list of consumer and state and municipal groups lobbied against the legislation, arguing that it would make it more difficult for the victims of fraud to recover their losses-thus emboldening corporate shysters. When President Clinton, under pressure from trial lawyers, generous campaign contributors in their own right, vetoed the bill, Dodd helped organize the Senate to override his veto, 68 to 30. For his services to the securities, accounting and computer industries that pushed for securities litigation reform-for which Public Campaign gave him a "Golden Leash Award" back in 1998-Dodd has raised over $1.8 million over his lifetime in office.

The last deregulatory fight is the one which has become most familiar in recent months: the all-out effort by the accounting industry in 1999 and 2000 to prevent the SEC from forcing them to stop selling consulting services to the same companies that they audited. Forty-six Senators and Congressmen wrote Arthur Levitt, then the SEC's chairman, and successfully forced him to back down. As noted in our last CPI (OUCH #100), these members of Congress were on average the recipients of $93,000 each from the Big Five accounting firms and the industry trade association, the American Institute of Certified Public Accountants. Overall the accounting industry has contributed $57 million to federal candidates and parties since 1989, according to the Center for Responsive Politics.

Though the Senate has now passed a relatively tough bill, in addition to its failure to treat stock options as expenses, it also avoiding voting on an amendment that would have allowed defrauded investors to sue lawyers and accountants along with corporate officers. The standards for auditor independence could be tougher, according to USPIRG. And now the bill has to be reconciled in conference with a House that voted in March to continue to allow accounting firms to consult for companies they audit and did nothing to close the revolving door between accountants and their clients. The lead sponsor of that bill, Rep. Michael Oxley (R-OH), is representing House Republicans in the final negotiations on the legislation. Over his lifetime in office, he is the number #7 career recipient in the House of funds from the securities industry, at $318,000, and the #20 recipient of accounting industry cash, at $130,000.

How has all this money in politics hurt us? The costs are still being racked up. Start with the hundreds of billions of dollars in shareholder value that have vanished as companies have been forced to come clean about the misleading numbers in their financial reports. Between 1997 and 2001, there were over 1,000 such restatements-and that was before Worldcom! Then take the huge drop in the stock market since its peak-a decline of over $7 trillion ($7,000,000,000,000) in capitalization. State employee pension funds have been just the most visible victims of that collapse; according to a new poll by USA Today/Gallup/CNN, 46% of Americans with any retirement savings are now planning to delay their retirements as a result of the market's implosion. (Even with the market meltdown, business lobbyists have been quietly beating back efforts to force companies to diversify their employees' 401(k) plans, reports today's Wall Street Journal.)

But add one more cost: the damage to democracy when so much money gets concentrated in the hands of so few. A tiny minority of Americans got incredibly rich ripping off investors, playing insider games and turning government policy to their benefit. Other legislative and regulatory decisions, beyond the three detailed above, contributed to that upward redistribution of wealth (think of the Clinton and Bush tax cuts, each of which were tilted toward the top 1%; the deregulation of banking, energy, transportation; and drastic cuts in government agency enforcement budgets). That tiny elite, we know from FEC data and academic surveys, gives a hugely disproportionate amount of all the campaign contributions collected by our representatives in Washington-the very people who shape economic policy. The basic trust between average citizens and their elected representatives, it is now very clear, has been corrupted. We are living in a plutocracy, with all the negative effects of being ruled by the wealthiest. But it is high time we reclaimed our democracy.