Soft money, hard lesson.(Bush administration and Enron Corp.)

The Bush Administration's reputation for never letting the outside world know what it's thinking is well deserved, but it's a safe bet that last week it was feeling wronged about Enron. The White House announced -- that's announced, not concealed -- that Kenneth Lay and other Enron brass had phoned two Cabinet secretaries and one under-secretary in October, as the company was starting its death rattle. As a reward for this candor, Washington went on full scandal alert, with the press and Congress demanding to be told who in the Administration knew what when and what they did about it. The problem with this line of attack is that when Enron got to the point of really needing some influence, it discovered that it hadn't bought any after all: the officials the company called evidently did nothing, and they seem to have made a point of not telling President Bush about the calls for more than two months, by which time it was too late to help. Another line of attack was on the opposite ground: that the Administration, in the words of Representative Henry Waxman, Democrat of California, "did nothing to protect innocent employees and shareholders who ultimately lost their life savings." But if the Administration had swerved to avoid Charge No. 2 (doing too little) it would have crashed head on into Charge No. 1 (doing too much).

Let's say the Administration had wanted to help Enron. What could it have done? It had three options. First, it could have asked Congress to pass legislation on the model of the Chrysler bailout of 1979 or last fall's airline bailout. Second, it could have tried to persuade the Federal Reserve Board to invoke an obscure provision of its charter, under which, in extraordinary circumstances, the Fed is permitted to lend any entity any amount of money on any terms, if five of its seven governors O.K. it. Third, it could have tried to persuade Enron's major creditors to give the company a little more time -- what's known in the trade as "moral suasion." The Clinton Administration did this during the South Korean financial crisis of 1998 and, just before it left office, in the California energy crisis. Moral suasion was certainly within the capacity of the Bush Administration, since the person handling most of the save-Enron calls, Peter Fisher, the Under-Secretary of the Treasury for Domestic Finance, helped run another such effort by the federal government in 1998, when Long-Term Capital Management was going under and Fisher, then at the New York branch of the Federal Reserve, helped talk its bankers into bailing it out.

The Bush Administration had to have known that Enron was in big trouble before the first calls came in, on October 26th. By then, Enron's president, Jeffrey Skilling, had resigned, the company had announced a $1.2-billion writeoff, the S.E.C. was investigating, and its stock was tanking. Every Administration has people whose job it is to track which important institutions might be in financial danger, and then to determine ...