WASHINGTON – The Senate is moving to bar companies from making personal loans to their top executives, such as those given to Enron and WorldCom officials -- and President Bush when he was a Texas oilman a decade ago.
The Senate by voice vote Friday attached the ban to legislation aimed at curbing a wave of corporate scandals that has rocked Wall Street. A vote on the overall bill is expected early next week.
"Perhaps the greatest need for our economy at this moment is restoring confidence in the integrity of the American business leaders," Bush said in his weekly radio address Saturday.
"Nearly every week brings news of greater productivity or strong consumer spending, but also a discovery of fraud and scandal, problems long in the making and now coming to light," Bush said.
He said his administration is working with Congress to pass legislation to protect workers and shareholders and investors and "will not stop working until a final bill is passed."
Rep. David Phelps, a Democratic congressman from Southern Illinois, urged lawmakers to pass the Senate bill to protect investors, employees and those corporate officials who play by the rules.
Phelps, in the Democrats' weekly radio address aired Saturday, said the small businesses in his rural district get punished if they do wrong.
"Why should large corporations and corporate officers not have to live by the same rules of honesty as the small businessman?" he said.
The Senate action came as the White House defended the $180,000 in low-interest loans that Bush received in the 1980s from Harken Energy Corp. The loans carried a 5 percent annual interest rate, and Bush wasn't required to repay the principal for eight years.
The president met Friday with his new financial crimes "SWAT team." The chairman of the panel, Deputy Attorney General Larry Thompson, pledged to go after corporate criminals "with vigor and an aggressive manner." Investigations have been opened by hundreds of prosecutors across the country, he said.
Harvey Pitt, chairman of the Securities and Exchange Commission and a member of Bush's SWAT team, said officials won't know how widespread the prosecutions might be until after the nation's 1,000 biggest corporations respond to an SEC order to have chief executives and chief financial officers certify the validity of financial statements already on file.
"That will happen in the next few weeks and when that does, that will give us a very clear picture of what's around," Pitt said.
In the Senate, supporters pushed the ban on personal loans as a way to prevent conflicts of interest.
"Why do executives at Adelphia, Enron and WorldCom need to borrow money from their stockholders?" said Sen. Charles Schumer, D-N.Y., who sponsored the amendment. "Why can't they go to the bank like everyone else?"
Bernard Ebbers, the former chief executive of WorldCom, received $400 million in loans from the company, which recently disclosed nearly $4 billion in accounting irregularities. Former Enron chairman Kenneth Lay sold some $70 million of his Enron stock back to the company to repay loans last year, including $16.3 million in the 13 days after he was warned by executive Sherron Watkins of serious accounting problems.
Earlier Friday, the Senate voted, 91-2, to limit debate to 30 additional hours on the legislation imposing new sanctions on corporate wrongdoing and tightening oversight of the accounting industry.
The only dissenters were Sens. John McCain, R-Ariz., and Carl Levin, D-Mich., whose efforts to add other, far-reaching measures to the bill were rebuffed Thursday by their Senate colleagues.
The measure has broad bipartisan support. The leader of the GOP-controlled House expressed approval Thursday of amendments adopted this week by the Democratic-led Senate to impose tough penalties for corporate fraud, including 10-year prison terms for securities fraud. The sanctions include, and go beyond, proposals Bush made in a speech Tuesday on corporate responsibility.
White House spokesman Ari Fleischer said, "The House bill is a tough bill, the Senate bill is a tough bill, and (Bush is) looking forward to signing a tough bill into law." He said it was too early to say whether the president would sign a final compromise bill crafted from the competing House and Senate versions.
Bush has given only qualified support to the bill, which would create an independent private body with authority to discipline auditors and establish auditing and ethics rules.
An accounting oversight bill passed by the House in April is considered weaker than the Senate version by consumer groups and some Democrats and does not contain the new penalties against corporate fraud and executives who deceive investors. After the Senate passes its bill, it will have to be reconciled with the House version by a committee of lawmakers from both chambers.