Matthew Hoy
By Matthew Hoy on July 2, 2002

Bush guilty of insider trading? According to Paul Krugman, he was, and it was only George H.W. Bush's conniving that kept the younger Bush out of the slammer to run for president in 2000.

But long before that ruling � though only a few weeks before bad news that could not be concealed caused Harken's shares to tumble � Mr. Bush sold off two-thirds of his stake, for $848,000. Just for the record, that's about four times bigger than the sale that has Martha Stewart in hot water. Oddly, though the law requires prompt disclosure of insider sales, he neglected to inform the S.E.C. about this transaction until 34 weeks had passed. An internal S.E.C. memorandum concluded that he had broken the law, but no charges were filed. This, everyone insists, had nothing to do with the fact that his father was president.

A few things to note. Krugman says that Bush dumped his shares "only a few weeks before bad news...." But according to a CNN report, it was "about two months." Weeks always sound shorter than months, a "few weeks" usually means three -- if it's four weeks you'd call it a month. If it's seven weeks, you'd call it about two months. But Krugman colors it with the "few weeks" reference. In contrast, Martha Stewart sold her stock in ImClone the day before that company's bad news.

While Krugman tries to color the decision not to prosecute Bush Jr. with the brush of nepotism, CNN has a different explanation:

In 1990 Bush unloaded most of his Harken shares for $835,000 about two months before Harken announced a big loss. That triggered an investigation by the Securities and Exchange Commission into possible insider trading by Bush, but the SEC took no action.

A look at Harken's stock price may show why: Bush sold for $4 a share. Harken stock did dip to $2.38 the day after the bad earnings were released, but four days later bounced right back to $4 a share, exactly what Bush had been paid.

And the stock kept rising: Bush attorney Robert Jordan said, "A year later, in fact, the value had doubled to $8 a share."

So Bush could have done much better if he had waited.

Is Bush completely pure when it comes to how he made his money? Nope. Of course, very few who make it big in business or government are. Remember Hillary Clinton's brief stint as a commodities trader? How about Krugman's own stint as an advisory board member for Enron?

Corporations throw around money in a hope to buy influence -- isn't that what all those White House coffees were about?

The real question is: What does that money really buy them? At least in Enron's case -- nothing.

Is Bush outraged by the accounting scandals? Krugman says that Bush is just faking it. It takes a real cynic -- or rabid partisan -- to believe that.

The old joke is that there is one thing every first-term administration wants -- a second term. Despite the common refrain of the left -- Bush isn't stupid. Bush saw what happened when his father ignored the economy, and he wont' make the same mistake. The corporate accounting scandals have been rocking Wall Street. To some extent, that is felt on Main Street. People look at their 401(k)s and when the numbers keep getting smaller it means big trouble for Bush.

Is he outraged? Yes? Is it genuine? Yes, even if the outrage isn't for the pure and benevolent reasons that Krugman would like.


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July 2002



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