The wave of corporate scandals in the US and the sharp decline in trust in business in general (see chart) forced US President George Bush to devote a separate speech to the fate of business. The President called for increasing the maximum penalties for "white collar" crimes and strengthening oversight of the implementation of existing laws.

Bush emphasized the need to prosecute violations such as document destruction and other forms of obstruction of justice. And he called for doubling the maximum prison term for communications fraud to 10 years. Bush reiterated his belief that CEOs should be held personally accountable for the accuracy of financial information they provide to authorities.

"I am a strong believer in free enterprise, but I understand very well that this system is based on trust," Bush said. "We see that the actions of some entrepreneurs have led to a loss of trust on the part of the American people. We need to act."

The White House's strategy is to reduce the problem to a few bad actors, rather than acknowledge the existence of a broader crisis. "Most businessmen are honest, decent people with nothing to hide," Bush said yesterday. "There are a few who are guilty, and we need to deal with them." The president must be a tough cop but a fair judge, says Kenneth Dubberstein, a Bush adviser.

Meanwhile, critics of the current administration see the "creative" approach to reporting and other corporate crimes that have been uncovered recently as manifestations of a systemic crisis. In particular, the president's opponents never tire of reminding him that George Bush used the same techniques in his own business practices for which he now calls for others to be tried.

In the 1980s and early 1990s, Bush was a board member of a small energy company, Harken Energy. In 1989, this company sold 80% of the shares of one of its divisions, Aloha Petroleum, to a structure created by Harken's own managers. And Harken also lent the money to the buyers. The deal improved the balance sheet and kept the shares from falling for a while. But the transaction was noticed by regulators, and the company had to adjust its report, admitting significantly higher losses. Without waiting for the publication of a new version of the report, Bush sold part of his share package. This sale was also the subject of an investigation, since Bush reported it much later than the required deadline.

No charges have been brought against the future president. But critics of the president, including economist Paul Krugman, who reminded the public of this old story on the pages of the New York Times, point out the similarities between the Harken operation and the technologies used at Enron. Questions about Harken are now constantly being asked of Bush at all press conferences. "We honestly disagreed about how to report on this very complex transaction," Bush said on the eve of yesterday's speech in response to another question. The president firmly rejected any comparisons with Enron.

But Krugman believes that by such actions the president and his current employees, many of whom also came from business, created the atmosphere in which violations by managers of Enron, WorldCom, Xerox, and Reliant became possible.

Bush takes on white collars