ABSTRACT
This chapter examines the domestic politics of banking, derivatives and securities regulation in the aftermath of the LTCM and Enron scandals. In particular it examines the government’s response to two crises within the context of regulatory ideology, Congressional debates, vested interests, and the “esoteric politics” of money and finance. The rescue of LTCM was the first application of the “too-big-to-fail” doctrine beyond a depository institution and raised concerns about the growing complexity of new financial institutions. On the other hand, Enron’s failure, as former SEC chairman Arthur Levitt said in an interview, was “symptomatic of a break down of the ethical values of business over a period of perhaps 20 years” (PBS 2002). Fundamentally, the Enron debacle revealed a dysfunctional accounting regulatory oversight, one that allowed a major corporation to circumvent rules designed to protect the investor and the employee from risky trading practices. The requirements for a transparent and trustworthy auditing of the firm’s records went by the wayside. And worst of all, the employees-many of whom were approaching retirement age-were robbed of their pension.
