Commentary: Will the Chief Executive Really Speak Out?

By Lee Walczak and Richard S. Dunham

For a White House that's warily eyeing the widening ripples of a white-collar crime wave, the question has come down to this: What should the President say, and when should he say it?

George W. Bush has watched for months as lurid tales of accounting scams, tax avoidance, and earnings manipulation spread through Corporate America. As investigations blossomed, Bush's aides have grown increasingly concerned that disillusioned investors might undermine the recovery, lose faith in Bush's probusiness economic policies, or--worse--start taking revenge on Republican candidates.

On the heels of WorldCom Inc.'s (WCOM ) announcement that it inflated operating cash flow by $3.8 billion, the sense that things are coming unhinged in the business sector is rising. That clearly calls for leadership from the top. And as the exemplar of what he calls the "Responsibility Era," Bush has been surprisingly reticent. On June 26, the President, at the global economic summit in Canada, gave his most detailed comments on the crime spree to date.

Bush called WorldCom's conduct "outrageous," and vowed hot pursuit of finagling financiers. "We've had too many cases of people abusing their responsibilities," he said at a photo session with Britain's Tony Blair. "We will pursue within our laws those who are irresponsible." Despite the tortured syntax, he made his point.

Still, it's an open question whether these flashes of Presidential frustration will reassure the public that Washington is on top of the problem. Bush has said little since Mar. 7, when he rolled out a largely voluntary corporate-governance plan that reformers contend falls well short of the sweeping changes that are needed. True, Bush is preoccupied with other weighty concerns, like the war on terrorism and the Middle East. But the fact is, he's deeply torn on the corporate crime issue because political advisers tell him it's a no-win situation for the GOP.

A Presidential critique that summons up images of systemic abuses, aides fear, could spook investors even more and harm the fragile expansion. It also would aid Hill Democrats who insist that permanent legislative reforms are needed--a stance conservatives resist. More troublesome for the GOP, focusing attention on the scandals only serves to reinforce an emerging Democratic line of attack for the fall campaign: Republicans' deregulatory fervor and Bush's chumminess with powerful business interests created the conditions for the financial abuses that are now breaking into the open.

"Bush has to speak up," says one top GOP strategist. "Democrats are going to go on the offensive about Republicans' laissez-faire attitude toward business. But the President also needs to restore confidence in the system." Some Wall Streeters agree. "The President should use the bully pulpit more," says Mark P. Vitner, senior economist at Wachovia Corp. "If people don't have trust in Corporate America, they won't invest."

Bush, however, seems to prefer private arm-twisting. On June 20, he met with Business Roundtable reps and said CEOs must take strong steps to restore confidence in their financial reports. Bush's message, according to International Paper Co. (IP ) CEO John T. Dillon: "I want you fellows to lead."

Going one-on-one with the corporate elite can be effective. But it's not enough, reformers say. "Bush may feel he can have more impact by directing his comments to movers and shakers," says DePaul University Professor Laura P. Hartman. "But these are the same people who are going to fund his reelection, so he seems conflicted--like an Arthur Andersen auditor."

As federal prosecutors zero in on Enron Corp., the freewheeling energy-trading outfit intimately linked to both Bush and Veep Dick Cheney, chances are that the President will finally be compelled to speak out at length on the roots of the current mess and on his "let business clean up its own act" approach. Will his speech be driven by lofty moral imperative--or represent cold political calculation? The singed members of the Investor Class will have to judge for themselves.

Washington Bureau Chief Walczak and Senior Correspondent Dunham cover politics and policy.

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