It sure looks like 2012 may be a great year for financial white collar criminals. Andy Fastow is out of prison. Mitt Romney appears to be the likely Republican candidate for president. I say ‘likely’ because the The New York Times and MSNBC are suggesting Romney holds a slight lead in polls as the iowa caucus starts today. Next comes New Hampshire, where Romney owns one of his pimpest houses. I don’t mean to imply that Romney is a criminal.
The idea that government needs to get out of the way of businesses and that corporations are people, too makes for a perfect storm. The biggest bankruptcies in U.S. history required having a party separate from the profiting party act as the container in which the loss or risk would (temporarily) hidden from view. Enron, Madoff, Lehman Brothers et. al., needed a place to stash their losses or potential losses. Regulation should have been in place to prevent that. But after deregulating energy in California, after failing to enforce regulation in the case of Madoff, and after deregulating and loosening regulations for investment banking in the case of the mortgage banking crisis it was possible to create the fraud that led to these banktruptcies.
Republican candidates still see government as the problem. In a sense they are right; government regulators and regulations failed the public. But how will the further retrieat of regulation or regulators protect the public? It won’t. The Republican platform is not focused on that concern. Their platform furthers the purposes of multi-national corporations at the expense of the public welfare in the hope that corporate profits will benefit “job-creators” who will then create at least some of those jobs within the more loosely regulated country in which they are profting. But 22,000 former Enron employees might take issue with this strategy.
So I am expecting Romney to win the Republican primaries and run against Obama in 2012. Should he win it will be the beginning of the next big wave of boondoggles, boondoggles amidst fantastic profits for corporations that take advantage of the new found freedoms. The 2002 Enron swindle was a $65 billion dollar bankruptcy, and the 2008 Lehman Brothers failure was $691 billion dollars. So what will 2012 bring in the may of major swindles? I don’t know, sorry. But history suggests that the last thing we need right now is government getting out of the way of “people” like Exxon or even the vaunted Berkshire Hathaway. Romney, or any other potential Republican candidate that thinks the problems we face are due to government intervention are not what America needs right now and they haven’t been for quite some time. But a Republican in the White House would certainly signal the all clear for those with creative schemes for circumventing the protections, weakened though they may be, against the hiding of risks and losses by corporate “job creators”.
The next big bankruptcy, if it conforms to the last few series of major bankruptcies will be one in which a fraudulent profit is made by hiding or distributing risk across an entire branch of business in such a way that when the eventual catastrophic event occurs, instead of the risk being absorbed across multiple carriers, and thus lessened, it is amplified. Perhaps something like the Piper Alpha oil rig catastrophe but 2 orders of magnitude larger and in a different industry, healthcare or insurance perhaps, or reinsurance for healthcare insurers.