Jon Corzine, the freshman senator from New Jersey, is uniquely positioned to deal with the swirling scandals of Enron and other related malpractices in high finance. He was a Wall Street insider himself and, indeed, did some deals for Enron. In 1994 Corzine rose to become chairman of Goldman Sachs, the vastly influential investment house, and presided during the decade’s booming financial markets. Then he retired and spent more than $60 million (nearly one-seventh of his personal fortune) to win election to the Senate in 2000 as, in his words, a “self-funded candidate.” Now Corzine is aggressively speaking for reform.
“I’m not sure I fully accept the ‘rot’ concept,” the Senator said with a small smile, when I asked how bad the rot is. “I think we have not updated our financial system for many years, and we’ve allowed the theme of deregulation to erode the checks and balances in our financial system, at a period of time when technology and globalization and financial entrepreneurship were growing at geometric paces. So I think there was as much a failure to stay apace with the system as there was rot.”
Still, he acknowledges, the rot is real too. “I think at the end of the day we will find it was more a bad-actor situation than systemic, but, you know, I wouldn’t bet my life on it,” he said. Corzine sees a degradation of values in business and finance that goes deeper than regulatory laws–a single-minded focus on earnings-per-share to the neglect of everything else. “The system to some extent has lost track of its other objectives of social responsibility, of ethics, as they relate to employees and their position in society,” he said.
In any case, the Senator recognizes the need for a long-term agenda of repair and reform and has already staked out a forward position in confronting the current outrages like the false independence of independent auditors, the ease with which much-celebrated corporations falsify their earnings and indebtedness and the myriad ways in which Wall Street banks and brokerages help companies game accounting principles and the tax code. “As interesting as Enron is as either a criminal or regulatory investigation, and it is, I’m mostly interested in it for purposes of revealing…the need to get on with updating our [regulatory] system for the twenty-first century, dealing with changes that we’ve been sitting on for a very long time, whether it’s pension reform or accounting reform or corporate governance reform or campaign finance reform.”
Senator Corzine promises to be an influential voice in all these matters, first, because he thinks and votes like an old-fashioned economic liberal (not many of those around anymore), and second, because he is intimately familiar with the inner mechanics of how finance and corporations function together and how their excesses damage society. His manner is deliberate and precise, even cautious, but also pleasantly free of the overheated rhetoric that passes for serious discussion among his colleagues. The man is not a bomb thrower. He is an investment banker who was at the table himself when deals were done and is not eager to turn on his former occupation. Still, his own stature and integrity will be measured by how deeply he is willing to dig into the muck. The present storm is an important turning point, a beginning, at least, of the long and difficult politics needed to restore the public values and protections eroded or destroyed during the past twenty years of laissez-faire orthodoxy. Corzine is taking the public’s side in that fight.