Posted on 17-7-2002
Bush
Not Clean
By PAUL KRUGMAN - NY Times 16 July 2002
Why are George W. Bush's business dealings relevant? Given that
his aides
tout his "character," the public deserves to know that he became
wealthy
entirely through patronage and connections. But more important,
those
dealings foreshadow many characteristics of his administration,
such as its
obsession with secrecy and its intermingling of public policy
with private
interest.
As the unanswered questions about Harken Energy pile up — what's
in those
documents the White House won't release? Who was the mystery
buyer of Mr.
Bush's stock? — let me now turn to how Mr. Bush, who got by
with a lot of
help from his friends in the 1980's, became wealthy in the 1990's.
He
invested $606,000 as part of a syndicate that bought the Texas
Rangers
baseball team in 1989 — borrowing the money and repaying the
loan with the
proceeds from his Harken stock sale — then saw that grow to
$14.9 million
over the next nine years. What made his investment so successful?
First, the city of Arlington built the Rangers a new stadium,
on terms
extraordinarily favorable to Mr. Bush's syndicate, eventually
subsidizing
Mr. Bush and his partners with more than $150 million in taxpayer
money.
The city was obliged to raise taxes substantially as a result.
Soon after
the stadium was completed, Mr. Bush ran successfully for governor
of Texas
on the theme of self-reliance rather than reliance on government.
Mr. Bush's syndicate eventually resold the Rangers, for triple
the original
price. The price-is-no-object buyer was a deal maker named Tom
Hicks. And
thereby hangs a tale.
The University of Texas, though a state institution, has a large
endowment.
As governor, Mr. Bush changed the rules governing that endowment,
eliminating the requirements to disclose "all details concerning
the
investments made and income realized," and to have "a well-recognized
performance measurement service" assess investment results.
That is,
government officials no longer had to tell the public what they
were doing
with public money, or allow an independent performance assessment.
Then Mr.
Bush "privatized" (his term) $9 billion in university assets,
transferring
them to a nonprofit corporation known as Utimco that could make
investment
decisions behind closed doors.
In effect, the money was put under the control of Utimco's chairman:
Tom
Hicks. Under his direction, at least $450 million was invested
in private
funds managed by Mr. Hicks's business associates and major Republican
Party
donors. The managers of such funds earn big fees. Due to Mr.
Bush's change
in the rules, these investments were hidden from public view;
an employee
of Utimco who alerted university auditors was summarily fired.
Even now,
it's hard to find out how these investments turned out, though
they seem to
have done quite badly.
Eventually Mr. Hicks's investment style created a public furor,
and he did
not seek to retain his position at Utimco when his term expired
in 1999.
One last item: Mr. Bush, who put up 1.8 percent of the Rangers
syndicate's
original capital, was entitled to about $2.3 million from that
sale. But
his partners voluntarily gave up some of their share, and Mr.
Bush received
12 percent of the proceeds — $14.9 million. So a group of businessmen,
presumably with some interest in government decisions, gave
a sitting
governor a $12 million gift. Shouldn't that have raised a few
eyebrows?
All of this showed Mr. Bush's characteristic style. First there's
the
penchant for secrecy, for denying the public information about
decisions
taken in its name. So it's no surprise that the proposed Homeland
Security
Department will be exempt from the Freedom of Information Act
and from
whistle-blower protection.
Then there's the conversion of institutions traditionally insulated
from
politics into tools for rewarding your friends and reinforcing
your
political control. Yesterday the University of Texas endowment;
today the
Federal Energy Regulatory Commission; tomorrow those Social
Security
"personal accounts"?
Finally, there's the indifference to conflicts of interest.
In Austin,
Governor Bush saw nothing wrong with profiting personally from
a deal with
Tom Hicks; in Washington, he sees nothing wrong with having
the Pentagon
sign what look like sweetheart deals with Dick Cheney's former
employer
Halliburton.
So the style of a future Bush administration was easily predictable,
given
Mr. Bush's career history
|