Magazine article Insight on the News

Angry Investors Could Be Political Wild Card. (Political Notebook)

Magazine article Insight on the News

Angry Investors Could Be Political Wild Card. (Political Notebook)

Article excerpt

In 1994 a strong wave of public disaffection with the political status quo propelled Newt Gingrich's House Republicans to victory. It was the year of the angry white male. Is 2002 going to be the year of the angry investor? And, if so, which party is likely to benefit from the so-called Enron effect?

The fallout from the collapse of the Houston-based energy giant is beginning to complicate life for party strategists trying to plot ahead for this fall's congressional contest. With any election the room for error is slim, but with the coming electoral competition mistakes could be especially devastating for either party given the narrow majorities on Capitol Hill.

Before Enron's bankruptcy and the subsequent public fear of other horrors lurking in corporate books, the election was shaping up to be a simple matter. Either the Republicans were going to be able to grab the presidential coattails and secure congressional rewards on the basis of George W. Bush's war popularity, or the Democrats would pull off the tactic of blaming their political rivals for mishandling the economic slump, especially if recovery is delayed.

Now the disillusionment of the investor class has to be reckoned with as, on the heels of the Enron mess, its members are getting mad and starting to question the very integrity of America's financial system and the interplay between politics and big business. Hence the Democrats' eagerness to try to tar the Bush White House with the Enron brush -- a bid complicated by the many favors granted to the energy trader by the Clinton administration.

Both parties realize that betrayed investors as a voting bloc easily could swing an election. The new investor class is a massive group consisting of about 84 million Americans. Predominantly middle class and suburban, they bought into all the New Economy talk. During the long bull market of the 1990s, they saw their wealth multiply to unimaginable levels and they exulted, realizing how different their lives would be from those of their parents. Now, with the dot-com implosion, the slump and the second worst bear market since 1945, they have seen their stock wealth reduced by 30 percent, or some $5 trillion. That money was earmarked for early retirement and to pay the kids' college fees.

Adding to their anger is the feeling that the market playing field wasn't level, thanks to cronyism and the collusion of investment banks and analysts in talking up shares and offerings. Meanwhile, they are watching corporate bosses from failed or failing companies make out like bandits with profits from insider sales and sweetheart deals. …

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