WASHINGTON — Even in a speech that urged a new government offensive against corporate fraud, President Bush on Tuesday again revealed his deep-seated skepticism about the ability of Washington regulation to solve social problems.
While endorsing "tougher laws and stricter requirements," Bush insisted that in the end, something else would be more important in curbing the wave of corporate crime dominating the headlines. "Ultimately, the ethics of American business depend on the conscience of America's business leaders," he said.
That emphasis on individual change over collective action is a consistent element in Bush's thinking. After the shootings at Columbine High School in 1999 in Colorado, he made almost exactly the same arguments in asserting that cultural change would do more to prevent a repeat of such violence than new laws.
As he frames his response to the wave of corporate scandals, Bush seems buffeted between that fundamental leeriness about new regulations and the growing political and economic pressure for measures to restore confidence in the stock market. The result has been to steadily tug Bush toward more aggressive securities regulation than he envisioned when he took office--although still not nearly as sweeping as most Democrats believe is necessary.
On Tuesday, Democrats quickly criticized Bush for failing to specifically endorse the reform measures they are pushing in the Senate, particularly the proposal to create an independent new oversight board to regulate the accounting industry.
"What the president did today in using the bully pulpit was good," Gary Gensler, an undersecretary of Treasury under former President Clinton, said Tuesday. "But calling for ... just throwing a few more laws at the bad apples falls short. At the heart of this, the president has still not spoken strongly for real reform of the accounting profession."
This hard line is a change in direction for many congressional Democrats, who in recent years sided with the financial industries to resist tougher government oversight. Only last year there was so little opposition in the Senate to an industry-backed measure to cut the stock fees that fund the Securities and Exchange Commission that it passed on a voice vote.
Yet it is Bush who has adjusted his course most dramatically since the corporate scandals erupted.
Even with his insistence that "the vast majority of businessmen and [business]women are honest," the pointed criticism of corporate executives in his speech was a hairpin reversal for a president who has mostly praised business and drawn heavily on industry officials to staff his government.
At the SEC, for instance, Bush not only appointed former accounting industry lobbyist Harvey L. Pitt as chairman, but has sought to install two other industry alumni as members of the five-member commission. Like other Bush regulators, Pitt initially stressed his desire to pursue a less confrontational relationship with business.
"In general," Pitt said in November, "my preferred approach to any regulatory issue is one in which the government's participation is as limited as reasonably possible, while vigorously ensuring that the public interest is protected."
Measured against that starting point, Bush's agenda Tuesday marked a striking level of new intervention, from a corporate fraud task force in the Justice Department to increased penalties for mail fraud and wire fraud, enhanced SEC authority to block payments to executives while a company is under investigation and a plea for the stock exchanges to approve rules requiring that a majority of all corporate boards be composed of outside directors, a longtime priority of investor groups.
"Self-regulation is important, but it's not enough," Bush declared in a formulation that came close to reversing Pitt's original credo.
But as Democrats and investor advocates picked over the fine print of what Bush said--and even more so what he didn't say--many argued that government needed to do considerably more to meet those goals than the president proposed.
"There definitely has been movement by the administration," said Ann Yerger, research director at the Council of Institutional Investors, a coalition of pension funds and investment firms that seeks corporate reform. But, referring to Bush and his aides as "reluctant reformers," she added, "The question is whether the changes go far enough. From our perspective ... we don't think they do."
Critics disliked only a few specific elements of Bush's proposals. Gensler, for instance, said that Bush was still moving too timidly by proposing to toughen penalties for mail and wire fraud--an indirect way of pursuing stock manipulation--rather than establishing a clear new criminal sanction against securities fraud, as Senate Democrats want. Others complained that Bush's proposed $100-million increase in funding for the Securities and Exchange Commission was only one-third the level Senate Democrats are pushing.
