Media Watch: George Will v. George Will
"As an economic scandal--a scandal of behavior in the private sector--[Enron] may be the worst in American history."
Is George Will right? The answer is no. The S & L mess was far worse. Enron will cost victims tens of billions of dollars. The S & L scandal cost hundreds of billions.
It is unlikely Mr. Will has actually forgotten the S & L crisis. He himself wrote with great force in the early 1990s about the outrageous conduct of the S & L's.
George Will, St. Louis Post-Dispatch, October 18, 1993
"So far the cost of the [savings and loan] crisis, counting 30 years of interest on the borrowing for it, will be $500 billion."
At first, we couldn't account for Mr. Will's seemingly deliberate case of forgetfulness, particularly since he goes to some lengths in his latest column to draw readers' attention to two other scandals, Credit Mobilier and Teapot Dome. Why mention those and not the biggest scandal of them all, the biggest scandal in the history of the entire world?
Then it occurred to us. Polls show that voters blame the Republicans for Enron. Mr. Will thinks that's unfair. So he is trying to convince readers that not all scandals are alike. Just because some (like Teapot Dome) involve malfeasance in Washington--for which politicians can be blamed--others don't. Enron is one of those that don't, he insists. It's"a scandal of behavior in the private sector." Hence, Republicans shouldn't be held to account, even though Enron is closely tied to the Bush administration and company officials echoed Republican boiler-plate rhetoric about the virtues of deregulation.
Enron is in fact nothing like Teapot Dome. Mr. Will is right about that. So far at least there's no evidence to suggest that any government officials took bribes (though there's certainly a hint that the company gave millions in campaign donations in return for something, though that's another story). But Enron is a lot like the S & L scandal. Then as now crooked business people in league with acquiescent government bureaucrats and unctuous politicians failed to protect the public from shoddy business practices. Mr. Will wants people to forget that by blowing smoke about a scandal Enron is not like (Teapot Dome).
What astonishes is that Mr. Will apparently thinks his readers are all such fools that they cannot remember an event the size of the S & L mess that took place just a decade ago. Americans are famous for their ignorance of history. But this ignorant they're not.
Just to set the record straight, this is a select list of economic scandals in American history. As can readily be seen, some involved mainly political malfeasance, some business malfeasance. Most involved both.
The list was prepared by HNN intern Yii-Ann Christine Chen.
YAZOO LAND SCANDAL (1795)
In 1795 the state of Georgia sold 35 million acres of western land in an area known as Yazoo to four companies for half a million dollars, about a penny and a half an acre. It was the most corrupt deal in American history. Every member of the Georgia legislature but one accepted a bribe in return for their vote. At the next election the voters tossed out the thieves. The contract with the four land companies was burned. In 1802 the state sold the land to the federal government for $1,250,000. A few years later the Supreme Court ruled that the original deal, flawed as it was, was legal and had to be honored. In 1814 Congress awarded the claimants over $4,000,000.
CIVIL WAR PROFITEERING
During the tenure of Secretary of War Simon Cameron, a conniving machine politician from Pennsylvania, corruption flourished during the Civil War. As a result of his sloppy practices, the federal government paid top dollar for shoddy blankets, tainted pork and beef, knapsacks that came unglued in the rain, uniforms that fell apart, and guns that blew the thumbs off the soldiers firing them. President Lincoln replaced Cameron after the secretary repeatedly issued supply contracts without competitive bidding, in violation of Lincoln's express orders.
CREDIT MOBILIER (1860s)
Credit Mobilier was a dummy construction company formed by the directors of the Union Pacific Railroad so that they could pay themselves inflated prices for the work that was done. Because Congress paid the bills through generous subsidies worth millions of dollars, the directors made a fortune. The more the line cost, the more money they made. Politicians shared in the profits after Congressman Oakes Ames sold stock in Credit Mobilier at discounted prices to fellow members. Among those on the take was Schuyler Colfax, later vice president of the United States under U.S. Grant.
GOULD AND FISK (1869)
In 1869 Jay Gould and James Fisk attempted to corner the gold market. In furtherance of their scheme they persuaded President Grant to keep federal gold reserves out of circulation. Eventually, they wound up controlling enough of the available supply of gold in New York City to bid up the price to record levels. Once President Grant realized he'd been had, the federal government resumed the sale of gold, and the price crashed--and along with it the stock market.
PANIC OF 1873
Risky loans made by high-flying bankers to railroad operators and others contributed to the worst economic collapse of the nineteenth century, the Panic of 1873. Ten thousand businesses were forced to close in a depression that lasted until 1878.
WHISKEY RING (1875)
In 1875 a group of distillers and public officials conspired to defraud the federal government of liquor taxes. The ring included Grant's chief secretary, who along with hundreds of others was indicted. Many were convicted. Grant's secretary, however, was acquitted after the president wrote a letter on his behalf, which was read to the jury.
TEAPOT DOME (1920s)
Teapot Dome was the name of a U.S.-owned oil field in Wyoming. When he was secretary of the interior under Warren Harding, Albert Fall secretly leased the oil reserves to a businessman who gave Fall hundreds of thousands of dollars in no-interest loans. Fall always insisted he was innocent. He was indicted and convicted, becoming the first cabinet member ever to go to prison.
COLLAPSE OF THE EMPIRE OF SAMUEL INSULL (1932)
Once president of the Edison power company, Samuel Insull was by the 1930s the head of a giant utility holding company. It's collection of companies was said to be so vast and so complicated that not even Insull understood fully how much he was worth or how much of the industry he controlled.
In 1932 as the stock market sank and the banks he had borrowed money from demanded control of his companies, his empire collapsed. Investors are said to have lost 700 million dollars, the largest corporate failure in American history until the S & L scandal. Insull was indicted for mail fraud, bankruptcy and embezzlement but fled the country. Eventually, he returned and was put on trial and was acquitted. The courts ruled that a holding company could not be held responsible for the acts of the companies it controlled.
SAVINGS AND LOAN (1980s)
Thrifts had been established originally to help homeowners obtain mortgages. But in the 1970s inflation undermined the stability of the industry, sticking the thrifts with low-interest mortgages arranged years before when inflation was slight. To help the thrifts survive Congress deregulated the industry, lifting restrictions on the kinds of loans they could make. Swindlers immediately took over the industry. As the saying went,"why rob a bank if you can own one." By the end of the 1980s the thrifts were in danger of collapsing after approving billions in insider loans for worthless projects. Congress eventually bailed out the industry at taxpayer expense.
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