Don't Name it, Cure it - 12 July 2002

They say - and I was reluctant for many years to believe they're right - that in old age you tend to revert to your origins in matters of taste, habits.

From the day I settled permanently in this country I naturally tried to do in Rome as the Romans did.

When, in my early days at Yale, I wondered if there might be a toast rack handy, the nice English professor I was breakfasting with very gently, almost confidentially told me: "They don't exist."

It was many years before I read Mark Twain's response when on his first visit to England he encountered a toast rack.

"In the heyday of the industrial revolution it took the mechanical genius of the English to devise a receptacle which guaranteed to deliver in the shortest possible time toast that was both cold and hard."

I was so eager to fit in with the natives as inconspicuously as possible that I at once started drinking bourbon in the evenings, especially when I was out on the town listening to the great blues men like Earl Hines and the Duke and Art Hodes.

It took me about 20 years to realise that I greatly dislike bourbon. I reverted to the humble but golden liquid of the Highlands.

And from that day on I decided that while I was becoming, in habits and tastes, no longer English, I wasn't American either.

I decided to be myself. Which left me, without apology, yearning for English ox tongue and Dover sole while not having to yearn for, but relishing, Maryland crabs, striped bass, key lime pie and American beef in all its great variety of succulent cuts.

Also, after 40 years, I was certain by then that I didn't like coffee. So I started the day out, as I do, with the drink that cheers but not inebriates, thank God, at nine in the morning.

Like everybody else in old age I have an increasingly set way of life.

I sit up in bed and swig the tannin and nibble at two cookies - what in Britain are biscuits.

If I lived in the South I should be dearly tempted to start the day with what they call biscuits, which are small flowery cakes of soda bread served hot with lashings of butter.

However, I live in the North where the secret of baking Southern biscuits is hidden.

The New York Times falls on my bed with all the lightness of a drunken sailor.

I spend between one and a half and two hours reading the stories and dispatches about America, the war and American doings abroad.

That's as much as I can take in. I have to skip Mexico's police problem, the guerrilla drug war in the mountains of Colombia, the Zimbabwe turmoil.

I had come to the end of these early morning chores - which I must say could well have been accompanied on Sunday by the classic early morning blues - when I came on a column, a piece with the blithe title, Story of a lucky man. Just the bracer I needed.

It was about a failing businessman who'd run through millions of other people's money but was now deep in debt and losing money.

However, a big company came along and bought him out, paying an amazingly high price.

But the big company did badly, yet the stock price stayed high enough for our hero to sell out and pick up close to a million dollars before the company slumped.

When I read that the accountant who handled this manoeuvre was Arthur Andersen, now collapsed and under indictment, I thought I was reading all over again the story of one of Enron's or WorldCom's bigwigs.

But now - I think from now on I'd better tell the story in the exact words of the storyteller, Mr Paul Krugman, the chief economic commentator of the New York Times whose lawyers I'm quite sure scrutinised every syllable of his piece with a microscope - because Mr Krugman is writing about George W Bush and a company called Harken.

Here is a true excerpt, quote: "Harken Energy bought his company at an astonishingly high price. Harken was basically paying for Mr Bush's connections."

He was then the son of a president.

Nevertheless, quote: "Harken did badly. For a time it concealed its failure, sustaining its stock price just long enough for Mr Bush to sell most of his stake at a large profit with an accounting trick identical to one of the ploys used by Enron a decade later.

"This," writes Mr Krugman, "is the way the ploy works.

"Corporate insiders create a front organisation that seems independent, but is really under their control.

"This front buys some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in on their stock. That's exactly what happened at Harken."

There came a time when the Securities and Exchange Commission - which is the policeman of the stock exchange - moved on these funny financial doings and ordered Harken to restate its earnings.

Mr Bush responded by filling in the proper forms seven months later.

This Sunday morning piece had no sooner appeared than a great cloud of amnesia about the war and terrorism descended on Washington.

Topic A was suddenly the president's stock sale of long ago.

The president was the immediate victim of a bombardment of questions - from the media, from both parties in Congress, from financiers, professors of economics, while, as a Washington observer wrote, "the Democrats salivated."

The piece could not have come at a worse time for the president.

He'd already announced that on Tuesday he would make a speech about the need to restore confidence in the market and to reassure investors that cases of fraud would be severely dealt with.

Also, he hinted, he'd ask for more money to strengthen the investigative powers of the SEC, the Securities and Exchange Commission.

But now he knew he would appear before that audience in the awkward position of being not the scourge of insider trading but a suspected insider trader himself.

On Monday the president dashed back from his brief holiday in Maine and he called a quick press conference in the hope of clearing the air, before his New York speech, of all these suspicions about an event that after all had happened a decade ago.

One or two reporters did come to reflect that nothing was done during the Clinton administration to uncover or correct these scandals.

But the press badgered him about nothing else and he appeared next morning in New York for his big speech under a darker cloud than ever.

There was no way he could win. He was addressing a whole congregation of Wall Street executives and officers and they responded very solemnly to his vow to put fraudulent directors in jail and create a sort of government detective squad to go after what Franklin Roosevelt once called "malefactors of great wealth".

He reminded his audience that America was the giant of technology and its economy the envy of the world.

A very odd way to start.

Then he proceeded to assure his audience that the vast majority of businessmen and stock traders were decent and honourable but his administration would get rid of the few bad apples.

This was a speech given on a day when the SEC was reported to have required 1700 companies to revise the account of their earnings in the flush years of the 90s.

The president stressed each sentence in praise of the system with his genial smile and a reassuring nod of the head - an expression I at once recalled having seen on the face of a surgeon who had performed on me an operation he assured me would make me feel a new man within a week.

But within two weeks I was feeling like the old man in considerable discomfort.

"Well," he said, "let's look at this thing."

He examined me and said cheerfully: "All is well, it's simply post-operative itch."

"Please," I said, "don't name it, cure it."

And that, we know from the polls, was the reaction of the general public to the president's speech.

He evaded the central issue - a radical reform of the accounting system which has gone from laxity to crookery in the most distinguished companies.

As a famous Nobel Prize-winner has put it: "It is rational, if not irresistible for executives to loot their companies when accounting standards are lax."

The public reaction is revealed not only by the polls, but by the dramatic behaviour of the stock market while the traders on the floor, both in New York and Chicago, were listening to him.

Half the households of the United States are in the stock market and from the minute the president started his speech the main industrial average went down, down - 170 points on Tuesday, 282 on Wednesday.

It may be that these melancholy numbers and the president's speech were an ill wind that did some good.

It made the senators and congressmen and women, who are sponsoring bills to discipline and reform corporate trading, rush back to their offices and make the bills tougher than they were in earlier drafts.

On Wall Street itself and in the president's audience there was and are still a disturbing number of CEOs and top financiers who want to be left alone, who look on outside efforts at reform and punishment as a certain way to strangle the system itself.

It is a problem in all exposures of fraud in high places that has cursed every civilisation we know about.

It was, remember, the ancient Romans who put the relevant question: Quis custodiet ipsos custodes? - Who shall police the policemen?

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