WASHINGTON -- Until WorldCom's admission that it hid a record $3.9 billion in losses, the revelations of business misdeeds that began with Enron's collapse in early December looked as if it would produce little more than some arcane accounting changes and a few prosecutions.
Washington's lack of appetite for stiff action was especially striking because among its most ardent advocates were heads of some of the most powerful business institutions in America, the New York Stock Exchange and investment bank Goldman Sachs. The lack of fallout was a gigantic relief to Republicans.
But the latest scandal may finally do what its predecessors have not so far -- set off a chain reaction that results in considerable economic damage and substantial political change. And it raises the question of how much of the booms of the last two decades were real, and how much were financial gimmickry.
"It's raised the decibel level of the crisis high enough the politicians are going to have to act," said former Securities and Exchange Commission chairman Arthur Leavitt.
Most immediately, WorldCom could make corporate scandal a fall election issue. The accumulated weight of accounting mistatements and executive self-dealing have already helped drive down the stock market in recent weeks, and pollsters now detect signs its effects are showing up in the political arena.
"It's now possible a loss of confidence in the market will spill over into the economy and therefore into the November election," said Bill McInturff, a prominent Republican pollster. McInturff and others have begun warning Republican candidates to prepare for Democratic attacks on the GOP as too close to business.
A new CNN/USAToday/Gallup poll finds that public confidence in business, which remained high until recently, has slipped to levels not seen in the early 1990s when a shallow but damaging recession helped force President Bush's father from the White House.
"The steady drip of scandal is beginning to have an effect on the economy and politics," said Karlyn K. Bowman, a polling expert with the generally conservative American Enterprise Institute.
More broadly, the new revelations could help force a re-assessment of the pre-eminence business achieved during the economic booms of the last two decades, opening the way for substantially stronger legislation and regulations than have been proposed so far.
On Wednesday, President Bush himself appeared to move slightly beyond the administration's stock position that the problems are confined to a few bad apples. He labeled WorldCom's accounting practices "outrageous," and warned executives that "when we find egregious practices. ... We'll go after them, and need to." Democrats picked up on the change quickly.
"Once you stop talking about bad apples and start talking about corporate responsibility, you're on the road to broader reform," said Democratic pollster Stanley Greenberg.
Congress took a first, tentative step Wednesday to increase funding for the SEC with the House passing a measure that pledges to double the agency's budget to $776 million.
At root, what must be answered in the debate over the recent scandals is how much of Corporate America's accomplishments in the last decades were real, and how much was the illusory product of financial manipulation.
Virtually all of America's economic expansions have ended with stock tumbles and scandal. What's striking this time, according to observers, is how widespread the problems are and how enriching for the executives involved.
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