As President Bush plans his first major response to the current scandals of capitalism, he could do worse than look for guidance from his Republican counterpart at the turn of the last century, President Theodore Roosevelt.
In 1902, Roosevelt instructed the Justice Department to prosecute the Northern Securities Co. for violating the Sherman Antitrust Act. Northern Securities was the WorldCom and Enron of the Gilded Age. Its crimes were exemplary of pervasive corporate corruption.
What was Northern Securities' offense? It had employed an aggressive merger strategy to gain a lock on transcontinental shipping from Chicago to the Pacific Coast. Scarcely a farmer, merchant or manufacturer didn't feel the weight of the railroad monopoly.
Then as now, all that synergistic merging required creative approaches to finance. To fuel its acquisitions, Northern Securities issued a blizzard of "watered stock" worth nothing. The dividends on those fictitious securities, however, required real cash.
The solution? Exploit the power of monopoly to charge shippers inflated prices. In the language of the day, it was a case of the "plundered people" being fleeced by the "moneyed interests."
Roosevelt's decision to go after Northern Securities put teeth back into a law that had been eviscerated by the Supreme Court, took on the richest and most politically influential capitalists and endeared Roosevelt to a public long-agitated over the undemocratic power the new corporations had amassed.
Indeed, the government's success in the Northern Securities litigation was in no small part responsible for Roosevelt's landslide victory in the 1904 presidential election. And it helped mark the beginning of the end of the Gilded Age and business' unaccountable and unchecked reign, along with the opening of the reform period known as the Progressive Era.
With Bush's performance in the current crisis likely to be a major factor in the 2004 presidential election, will he turn Roosevelt's motto on its head--speak loudly and carry a small stick--or will he propose measures the Rough Rider himself would be proud of?
Unfortunately, Bush operates in an environment far less conducive to acts of political daring than Roosevelt enjoyed, despite the remarkable similarities between the two eras.
