West Wing Story: Handshake Capitalism

Call it "faith-based capitalism." That's the new religion that President Bush and his economic team are trying to sell around the country.

Bush was in Alabama on Monday telling a crowd of Birmingham business leaders and others that, despite the dipping Dow, "the economy is coming back. That's the fact." The backdrop behind him on stage read STRENGTHENING OUR ECONOMY in both big letters for the local audience and small letters for TV viewers. But the speech had little to do with the economy-let alone strengthening it. And by the end of it, the market was off another 200 points.

It angers White House aides that reporters try to blame ticker tallies on Bush. Last week, Press Secretary Ari Fleischer was carrying around a fever chart of stock-market performance before, during and after Bush's recent big corporate-reform speech in New York. He showed every reporter he could corner that the biggest dip that day happened a good hour and a half after Bush's speech ended. Message: it wasn't Bush's fault the market tanked.

Certainly, traders respond to a lot more than presidential speeches. Bush's attempts to "calm" investors, however, have not been successful. But he's not as worried about the markets as much as he is about the overall economy. At the first meeting of the newly created Corporate Fraud Task Force late last week, Bush's top economic adviser, Larry Lindsey, says the president told the group: "This is all about jobs. We can't have crooks destroying jobs, but we also can't destroy the economy in the process."

Before the August recess, Bush wants to sign some version of the corporate-reform bill being hammered out in Congress. But as he said in Alabama, attempts at reform should not jeopardize "innovation and enterprise." Bush believes the rules that we already have work, we just need to enforce them. "We can't pass a law that says 'you will be honest'," Bush told the Birmingham audience. "We can pass laws that say if you're not honest, we'll get you."

Ultimately, Bush has faith in corporate executives to act honorably. When Bush met with the Washington-based Business Roundtable in late June, he did not talk to the some 70 CEOs about regulations or markets. He spoke mostly about terrorism; his biggest economic worry remains another terrorist attack. Instead of addressing Enron's problems head on, for instance, Bush he simply told the CEOs that they had to lead by moral example. "You have to step up," one participant said he told them.

This rosy business ethic comes straight from Midland, Texas, where the president grew up and spent his early career as an oilman. There, as his old friend Mike Conaway explains, "You break your word, you go against what you stand for, and you're done." Conaway was CFO of Spectrum 7, the oil business Bush ran before selling it to Harken Energy. When Conaway lost his job in the buyout, he says Bush used his sway as a board member of United Bank to get Conaway a job there. Friendship mattered more than expertise in small, tight Midland circles. "My experience with banking was having a checking account," Conaway explains.

The Midland business ethic also meant that who you were often mattered more than what collateral you had for, say, a $500,000 loan. Of course, it was precisely that sort of put-friends-first attitude that may have led to the questions now dogging Bush about his sale of Harken shares just before their price dropped. Bush got $848,560 from selling the stock ahead of the fall-and he now proposes banning the type of preferential loans he received while he was on the Harken board.

The president's friends also say he would always stick to his word-even if it sometimes meant making bad business decisions. Conaway remembers when Bush shook hands on a deal to buy 150 wells southwest of Midland. The operating expenses were high, so they were counting on oil prices to stay up around $17 to $22 a barrel. But before they could formally close the deal-and bring in those pesky lawyers-oil prices dropped to around $10 a barrel. "We could have figured out a way to bail out," Conaway explains. "But he went ahead and bought it because he shook hands on it."

Another Midland buddy, Don Evans, now Commerce secretary, calls that "handshake capitalism." Last week, Evans launched what seems to be the start of the Trust Us Tour. He gave four speeches in which he told stories about the homey way he and the president did business back in Midland. "We didn't call a lawyer. We didn't sign a contract. We shook hands, assembled our financing and swung for the fence," Evans said.

Meanwhile, most Americans are paying more attention to the plummeting market than to questions about Bush's financial past. At a GOP fund-raiser Bush attended in Birmingham this week, Rev. Ben Little asked the audience to pray for the stock market. "Lord, you never destroyed a nation for a bad economy," Little said. God would, however, destroy an amoral nation, he added. By the time Bush got back to Washington the prayers seemed to be answered. The stock market rose again-to just 45 points shy of where it began the day. Maybe that's real faith-based capitalism at work.