AUSTIN, Texas -- Holy smoke! I know hellzapoppin' with the news here lately, but let's try keeping our eye on the shell with the pea under it. Fascinating as all this inside-D.C. stuff is about Rummy and Cheney, and who leaked the CIA agent's name, there's some major stuff being buried in the business section.

            The manipulation of mutual funds  -- nice, safe, comfortable old mutual funds -- is a story heating up nicely. In addition, if you are following the trial of Frank Quattrone in the nasty case of manipulating high-tech IPOs, you already have been whomperjawed over the goings on.

            Add The New York Times Sunday account of how states and municipalities have been talked into bond issues by investment banking firms to cover pension costs, with highly unfortunate results, and you have a creepy and getting-creepier picture of the entire financial services industry.

            "On a risk-adjusted basis, the only people who can make money on this are the investment bankers," Robert C. North, chief actuary for New York City's five pension funds, told the Times. In New Orleans, city officials who had expected to make money by selling bonds in late 2000 now find they will cost the city over $280 million.

            While financial service companies are running more and more heartwarming ads about how they live to make our dreams come true, I'm starting to wonder if the whole structure isn't what economists call "control fraud" -- rotten from the head down.

            For reasons never clear to me, Enron, Tyco, Worldcom and the rest of the first wave of corporate disasters were written off in jig time as "a few rotten apples." We seem to have forgotten the old saw about the rotten apples spoiling the whole barrel.

            One warning flag is that the financial services industry is one of the largest campaign contributors of any special interest in the country. When industry bigwigs kick in contributions at that level, they want something. They wanted repeal of the Glass-Steagall Act and got it. They wanted to deregulate the S&Ls, and they got it.

            One of my long-held theories is that bankers, as a group, are quite stupid. I believe I can prove this with more than the S&L mess. At various times, American banks have gone nuts lending money to Latin American countries that then needed bailing out. They still stupidly resist regulation of hedge funds, which may yet bring down the entire banking structure.

            One of their recent brainstorms was to mail out credit cards to a whole lot of people with bad credit records. Amazingly enough, these citizens had trouble keeping up the payments, which then caused the banking industry to go to Congress and demand bankruptcy reform, making it more difficult for citizens to get out of financial trouble. Not only are Fannie Mae and Freddie Mac in hot water, as The Wall Street Journal keeps reminding us, but so are the Federal Home Loan Banks.

            Now, I'm no economist, so I leave it up to Paul Krugman, Jamie Galbraith, Allan Sloan and others as to whether all this means we should put our money under our beds, but I do know politics -- and what I hear are alarm bells ringing, big-time. We are so NOT ready to face the fact that we could well have huge systemic problems.

            As we know from Round One with Enron, the Securities and Exchange Commission is anemic from years of being bled by underfunding. The New York Stock Exchange, recently the subject of much bad publicity, has barely started to get a grip on its own problems. One telling point is that greeed (with three e's) continues to rule in the boardrooms. All the wailing and gnashing of teeth over greeed out of control, and still these folks are cutting themselves mind-boggling pay packages.

            Above all, we are stuck with an administration that believes self-policing can solve all these problems. True, we have heard some heart-rendering (as they say in the Texas Lege) vows about how never again will the "fire wall" between banking and stocks be crossed (what did they think was going to happen when they repealed Glass-Steagall?), but notice how it plays out in practice. As per Quattrone's trial, the perps apparently feel free to destroy emails and other records, consider it "legal mumbo-jumbo" when they're about to be subpoenaed and otherwise feel free to waltz on their merry way.

            People tend to take their cues from the top. I heard an alarm bell when I read, concerning the outing of CIA agent Valerie Plame, that it took 12 hours for the White House counsel to send out an advisory to the staff about not destroying relevant records after the Justice Department took over the investigation. The whole point of email is that it's instantaneous.  

            I never root for bad things to happen, and I'm sure not hoping for a fiscal meltdown. On the other hand, the Boy Scouts are right. Whether or not there is any leadership from the Bush administration, it is time for those creaky regulatory agencies to bestir themselves before something awful does happen. Let's pay attention here, team, before it all gets out of control.

            To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at COPYRIGHT 2003 CREATORS SYNDICATE, INC.