Man Without Qualities

Wednesday, July 17, 2002

Harken Up The Wrong Tree

FURTHER UPDATE: It looks like Senator Tom Daschle at least is getting a wiff of the option-free, business-free-future for the Democrats he is helping to create, and he doesn't seem to like what he sniffs in the air.

But House Minority Leader Gephardt sees a brave new world coming for him!


UPDATE: Max Power writes to emphasize out that Bush need not have disclosed all information about the stock he sold to his buyer, only all material non-public information. Max is correct, and the phrasing below is over simplified in that respect, thereby suggesting Bush is more exposed than he really is.

Max also points out correctly that if Bush accepted any pay off, that would be alarming. I agree. It was also alarming that Hillary Clinton accepted the notorious and still unexplained $100,000 - and these matters are very comparable, as Max points out.

But unless some actual evidence of a payoff is adduced, nothing disturbing has been revealed in Bush's case so far. Bush sold his stock two months before Harken posted an unusually large quarterly loss. It is the constant frustration of equities fund managers and analysts everywhere that there are few executives of public companies who can reliably predict their quarterly results that far in advance - and the spot memos on recent corporate performance Bush is said to have received as a director contained nowhere near the information needed to predict quarterly results. In fact, much of the current uproar in accounting practices is the product of executives trying to "deliver quarters" to Wall Street when that just can't be done - hence the temptation to "warehouse" losses or "manage" the earnings of the company. What we do know is that the stock price went up strongly in the intermediate period after the initial negative market reaction to the quarterly loss, which suggests that buyer and seller were acting fairly normally. It is also strange that the loudest hue and cry in this matter is coming from the "Bush is a Dumb Businessman" crowd, who in this case seem to want to cast him as a predictive financial wiz.

It is useful to compare this situation with Hillary's. She claimed to have made her winning commodities trades herself on the basis of what she read in the Wall Street Journal, where that paper subsequently ran an article pointing out that it had published almost no relevant information on that topic during the relevant period. To my knowledge, no serious commodities expert has come up with a reasonable explanation for her winnings (other than a commodities "straddle", a possibility which was subsequently discounted).

The media see fit to re-examine Mr. Bush's old trades in the light of the current markets uproar. That's not wrong and not very surprising.

Hillary's trades are also old news that should be revisited by the media especially because they are bugging Bush, but that is not happening. That is wrong and not very surprising.

And, by the way, if you're not reading Max regularly, I believe you should be.


Even some good liberal commentators like Matt Miller continue to seek El Dorado in the identity of "the unnamed 'institutional investor' who came out of nowhere, unbidden, to buy Bush's shares of Harken Energy in 1990." There has been much more or less unfounded speculation that the buyer was a member of the Bass family, or maybe Richard Rainwater associates.

But, as Mickey Kaus beats me to pointing out (darn him!): "Isn't it also true that if Bush was relieved of his Harken stock, before it temporarily tanked, by a friendly benefactor (as has been suggested) then Bush is almost certainly not guilty of using his inside-information to foist the stock off on some innocent third-party buyer."

Contrary to what the media keep saying, selling stock on the basis of "inside information" is not morally wrong or criminally or civilly actionable.

What is improper is for a seller to sell stock and not tell the buyer everything the seller knows. If Bush had any relationship with the buyer, then he is almost certainly not running afoul of insider-trading laws. Further, the right of redress lies with the buyer, and is the buyer's to waive. This buyer seems to have waived if there was any problem, since the buyer is not only not suing Bush but is not even revealing the buyer's name.

So why are the Democrats pursuing this chimera?

There seems to be some very silly speculation that if the buyer was a Bush friend who paid full price, then it may have been some kind of "pay off."

But the same could be said of any transaction. For example, Bush's sale of a house. This approach just confesses that the insider-trading angle goes nowhere. And all the inconsistent, unsupported Democrat speculation just increases the public impression they are acting from silly partisan motives.

Given the President's continuing approval rating of about 65%-70% despite the Democrat and media pressure on this topic (some polling data indicates the public is more skeptical about members of the Administration other than the President, but nobody in the Administration is running for office for more than two years, unlike members of Congress), maybe the Democrats will want to revert to the "what did the President know and when did he know it" hooch they were peddling a few weeks ago.

The Democrats might also want to keep track of how all their naked and increasingly general anti-business warfare is going to play with the business supporters the Clinton-Gore administration was able to round up. Will people such as Silicon Valley entrepreneurs be happy when they try to access capital markets rendered inert by Democrat scaremongering and their class warfare rallies? And didn't all those Democrat-leaning software executives get rich - and hope to get rich - on the very options now demonized by the Democrats? Time will tell. True, the Democrats have everyone on the run in public now, at least in the sense that Republicans will not resist even the most inane "reform" measures.

But I very much doubt that either Wall Street or Main Street businessmen are feeling very friendly towards Democrats right now. I’ll bet they are mad as can be, but have to shut up and bide their time. And their love will not increase as all that restrictive, Democrat-originated legislation kicks in, and the public at large forgets all this fuss as the public at large is want to forget the fuss-of-the-day. Indeed, just to pluck but one example, one wonders how the big media mavens at, say, liberal AOL-Time Warner feel about the Democrat push against business right now. In the present climate stoked by Democrat-fostered hysteria, there may just have to be a big SEC investigation, maybe a Justice Depatment investigation. One wonders how Mr. Parsons and other AOL-TW executives feel about all that.

How much of a future is there for a modern American political party that wants proudly to be known as the "Party Against Business." The Democrats are letting Messrs. Daschle, Gephardt and company teach them by example. Do they plan to do fund raising under their own names in the future?

And one wonders if the Democrats know the meaning of “Pyrrhic Victory.”

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