Q&A: Gephardt: "The Economy Is Falling Down Around Their Ears"

With critical congressional elections looming, Democrats will try to use the recent series of corporate scandals to paint Republicans as agents of Corporate America. More specifically, they'll blame former House Speaker Newt Gingrich and his Republican Revolution for fostering an era of freewheeling capitalism. On June 27, BusinessWeek correspondents Paula Dwyer and Lorraine Woellert sat down with House Minority Leader Richard A. Gephardt (D-Mo.) to discuss the Democrats' election strategy.

Q: What can Congress do to fix problems that seem to be deeply rooted in the go-go business culture?

A: We have got to...see [if] needed regulations were relaxed or changed wrongly. We have to put those rules back in place or adjust rules that were not working correctly. For instance, part of the question here has to do with accounting rules and the way accountants are governed. One issue is the role of boards of directors, what their power should be, who should choose them.

One of the things we've got to look at is a national commission for corporate reform. I think the problem is big enough that it may require that kind of effort. Finally, it's clear that in the past 10 years, we've had efforts to either cut or keep level the money we put into Securities & Exchange Commission enforcement. You have to ask yourself if that was the wisest thing to do.

Q: You are urging Democrats to make corporate crime a major line of attack against Republicans in the fall. How do you intend to frame this issue?

A: Well, the facts are the facts. People will look at us and ask whether we did the right things to keep faith in our system of governance and our economy. Individual candidates are going to have to deal with what they did or didn't do. We now have 60 million people invested in stocks. And they're asking tough questions, like what's happening to my retirement, what's happening to my 401(k). It's a legitimate election issue.

Q: So you're laying part of the blame for Enron, Arthur Andersen, and WorldCom at the door of the Republicans?

A: We have had an environment in this country, created mainly by my friends in the other party, that government was always a failure, that the tax code ought to be pulled up by its roots. That sent a message to the corporate community [to] look for loopholes or for ways not to adhere to government rules.

Q: Are you suggesting that Newt Gingrich's Contract With America sowed the seeds for the current scandals?

A: If you look back at the statements made by [House Majority Whip] Tom DeLay and Newt Gingrich about the deregulation of business, I think that started to create the climate we are seeing.

Q: Can you point to specifics?

A: There were attempts to tighten accounting rules that didn't get done. We had a [Republican-inspired] change in the law with regard to [limiting] stockholder suits.... During the Clinton Administration, the ability to bring those suits in state court got stopped. That took away a very important tool for the private enforcement of stockholder rights.... Congress also took energy-trading oversight out from under the Commodity Futures Trading Commission. That could have led to some of the problems we saw in California and with some of these [energy-trading] companies.

Q: Have we seen enough Presidential leadership on this issue?

A: Congress is on the November ballot, [President] Bush is not.... It's really the Republican congressional leadership that you have to look at. Don't they get it? Are they tone-deaf? The economy is falling down around their ears....If people want these problems solved, they will want a Democratic Congress.

Q: Do you see any downside to a new raft of prescriptive laws?

A: I've had businesspeople say that Congress needs to deal with this problem. They know that good enforcement of sensible rules is good for business. And it's good for capitalism.

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