Jewish World Review Feb. 14, 2002 / 3 Adar, 5762
http://www.NewsAndOpinion.com -- THE public is starting to tire of endless stories about Enron and the related crisis in investor confidence. However, for those who can stomach one more Enron-related column, here are some inside parts to this story that directly affect our own pocketbooks. One relates to the power of the media, the other to the vulnerability of a yet-to-be-disclosed industry.
First, here's a good tip for anyone who even marginally cares about how the stock market and, ultimately, the economy might perform: It would be wise to take the time each weekend to read a copy of a publication of which most have heard but many average investors don't see -- Barron's.
Local business pages, big-time business dailies such as The Wall Street Journal, and the 24-hour financial news programs (particularly CNBC's morning program "Squawk Box") all break stories and give tremendous insight. But Barron's, given the fact that it is published each weekend, seems to have the element of surprise that leaves corporate and political spin doctors flat-footed and with no immediate weekend venue in which to answer a negative article.
As a result, this powerful weekend business report has taken on major corporations, such as in its now-famous analysis of the potential woes of Amazon.com several years ago. It has sent investors into a frenzy and altered the public's view of an entire industry.
In the instance of the Enron debacle, the publication was not only part of those ahead of the curve on the potential fallout, it was also a leader in letting investors know about other companies that may have similar problems.
The power of the media to impact our economy cannot be understated. That having been said, there is a related side story to this entire accounting issue that has yet to be told. And it is this story that will test whether the media and politicians want to push the envelope and potentially destroy our economy or not. It is the tale of the impact of these corporate follies on the nation's insurance industry.
This columnist already noted several months ago that the devastation from Sept. 11 left many insurance companies, and those who back them up through a system of re-insurers, with staggering losses. Most of these companies were property and casualty types -- most household names that insure millions of homes and large businesses.
Needless to say, these companies were left shaken but still standing after the claims related to Sept. 11 were processed. Suddenly, many of these same insurance companies were facing new costs related to coverage of Enron, as well as other potential liabilities from the collapse of corporate entities such as telecommunications giant Global Crossings.
For example, one insurance company, respected worldwide for its "Cadillac" service and willingness to avoid "jerking its clients around" when it comes to dealing with legitimate losses, reportedly suffered significant claims related to the World Trade Center tragedies. Then came Enron. Insiders report that this same company, through a series of potential underwriting blunders, became vulnerable to hundreds of millions of dollars in additional payouts over the energy company's collapse.
Suddenly, America's entire insurance industry is holding its breath. How many more companies will be accused of "off balance sheet" activities that can somehow be linked to the demise of shareholder value, or even worse, insolvency? And how many more claims are out there waiting to be filed should the whole house of cards crash down on the collective heads of corporate America?
The answer to all of this may be in one small piece of good news and a set of instructive suggestions.
First, the news. While everyone from The New York Times to Fortune magazine was reporting this past weekend on the potential labyrinth of other Enrons that might exist, Barron's seemed to have moved on to a new topic -- a complicated explanation of efforts to eliminate offshore tax havens. Hence a post-weekend stock market that shot upward on its first day of trading.
Now the suggestions.
The Democrats in Congress, who smell blood over the potential political fallout from GOP links to Enron, must recognize that endless hearings, particularly those that result in people losing their stock value or even their job by stalling investor confidence and economic recovery, ultimately don't result in much more than filler for CNN. And the GOP must get off the defensive and join in passing emergency legislation to reform reporting and disclosure laws so as to end the endless doubt about the true value of our nation's leading corporations.
The media, for its part, must recognize that while they have a right to report what they know, they must follow the lead of cutting-edge publications such as Barron's. Rather than wallow in Enron and guess at how many others might suffer a similar fate, why not move on to the next major issue? When continued picking might result in the collapse of the very institutions needed to insure the average citizen's home and car, there is too much at stake to simply sensationalize what is already
02/07/02 The epicenter of quiet but powerful shifts in the American political landscape