The great game of catch-up. (Capitol Ideas).

There have been moments in American history when abuses of capitalism reached such proportions that the government felt compelled to step in, often outraging American CEOs along the way.

The Homestead strike in 1892-- when Henry Clay Frick and Andrew Carnegie sought to break the unions that were threatening the profits of their steel company--is perhaps the best-known example. When Frick called in 300 Pinkerton guards and sent them by barge up the Monongahela to seize a steel plant, he won the battle and sent the rest of corporate America into a decades-long war with Washington over the proper scope of government regulation. Those events sparked an entire political movement and gave Teddy Roosevelt the power to take on some of America's most powerful corporations.

The Enron debacle is still too fresh for anyone to know whether it, too, will galvanize government action or just go into history as a spectacular bankruptcy, in which greed, political connections, hubris and bad judgment came together to shatter lives and eviscerate retirement savings. Congress is threatening broad legal changes, changes that its more honest members admit should have been made years ago.

But if there is any silver lining to the tragedies resulting from Enron's fraud, it may be that some kind of rebalancing of power will finally take place between corporations and their shareholders with or without government help.

Enron's troubles were a calamitous byproduct of an otherwise golden era in the American economy, the boom of the l990s. It was an era of enormous productivity growth and corporate innovation, envied around the world. But it was also an era when innovation begot deception. At Enron it worked for longer than anyone expected.

In their glory days, Enron's executives dismissed reporters, analysts and competitors who raised questions about their practices. They had a point: Enron certainly was innovative, and when it came to questions of deregulation, it was often on the right side of the Light. The irony now is that Enron's abuses are likely to undo whatever good the company accomplished as Congress belatedly steps in to prevent a recurrence.

"After all of the sound and fury of these investigations," Senator Richard J. Durbin, the Illinois Democrat, said as Congress realized the degree to which it had slept though the 1990s, "the bottom-line questions are: Is Congress willing to amend the law to rein in the greed of the next Enron? Are we willing to concede that the genius of capitalism can result in ruthless behavior without our oversight and the protection of the law?"

What Senator Durbin did not add is that Congress passed up opportunities to crack down on the practices that let Enron abuse the system. Two years ago, the then-chairman of the Securities and Exchange Commission, Arthur Levitt Jr., proposed rules that would have prevented accounting firms from acting as consultants to companies they were also auditing: exactly the conflict of interest that made Arthur Andersen, however unwittingly, a participant in the Enron deceptions. Even if his efforts had succeeded, Enron's executives likely would not have been deterred. But we'll never know. Levitt was forced to back down under pressure from Senate members, many of whom were also receiving campaign contributions from the accounting industry. "We were wrong," Democratic Senator Robert Torricelli of New Jersey told Levitt in January. "You were right."

No doubt when this is all over the accounting industry will operate under new rules, and the shell games Enron played will be outlawed. But unfortunately, there is no way to legislate against the fundamental problem that afflicted Enron: a culture that put the welfare of the top executives ahead of investors and employees.

In their arrogance, executives forgot that when they took Enron public, they committed themselves to a code of conduct with the nation's investors. Its fundamental element: All investors are entitled to detailed information about the company's performance and prospects. But the team assembled by former CEO Kenneth L. Lay, and abetted by Arthur Andersen, used the rules to subvert the principle. The purpose of their wildly complex partnerships was to let a few big investors in on the secrets, while keeping everyone else in the dark.

Consider the purpose of just one of the three major partnerships, called LJM2. Enron attracted private investors by offering insider information. It boasted of the privileged details in documents distributed to those potential investors. "Due to their active involvement in the investment activities of Enron," one such document issued by LJM2 said, "the Principals will be in an advantageous position to analyze potential investments for LJM2." (Those principals, of course, were Enron's senior financial officers.) "The Principals believe that their access to Enron's information pertaining to potential investments will contribute to superior returns.

Translation: Enron's officials, to enrich themselves and select investors, will make use of information not given to the ordinary shareholders who bought Enron stock over the Internet, or even employees who were putting money in a 401(k). Worse yet, the corporate chiefs' financial stake in the partnerships gave them an incentive to run up short-term profits and cash out their stakes, no matter what the long-term cost to investors.

That takes a certain corporate culture, one that regards the securities laws as a nuisance rather than a protection, one that assumes the officers should not be questioned in their judgments about what is in shareholders' best interests. It is a culture reminiscent, in some ways, of the l890s, when industry leaders believed they alone would set the rules for labor, or of the l920s, when the regulation of the stock market seemed to many corporate titans to be an impediment to capitalism.

As their lawyers strive to get them out of trouble, Enron's officers will claim, perhaps legitimately, that they violated no laws. Maybe not, but the spirit of the code between corporate officers and shareholders was violated. Even if the accounting practices prove legal, the shredding of documents after investigations began gives prosecutors all they need: the ability to bring obstruction-of-justice charges that can be used to turn midlevel managers into witnesses against their bosses. That is why it is possible that some of the innovative heroes of American capitalism of the l990s may well be figuring out their next ventures from the libraries of some of America's finest federal prisons.

So what should Washington do? And what are the risks that it will do too much?

Some of the cures are obvious. Levitt's regulation of the accounting industry's dual roles of both auditor and consultant seems bound to happen. Andersen's leaders knew that the more complex the accounting problems were, the more Enron would seek help from the consulting arm.

And while Arthur Andersen claimed that there was a "Chinese wall" between the auditors and the consultants, clearly the consulting business thrives on what any auditor learns from its deep examination of a client's inner workings.

Along the way, Congress may want to look at the effectiveness of "audit committees," of the board of directors that are supposed to oversee the process. In Enron's case that committee failed. It was populated by prominent business leaders and former regulators like Wendy Gramm, wife of Senator Phil Gramm and former head of the Commodity Futures Trading Commission, but they sported their own potential conflicts. Enron often donated to their favorite charities or projects.

In this scandal, the conflicts spread well beyond Enron. The company generated so much business for major investment banks that it should be no surprise that their securities analysts kept recommending the stock until days before the company declared bankruptcy. The securities firms, of course, also claim that the analysts are walled off. But who are we kidding? That potential conflict of interest closely mirrors the one at the accounting firms. But it is doubtful that Congress will take its sudden newfound interest in regulation as far as investment banking.

Unfortunately, preventing the next Enron is a little like fighting the last war. Congress will close loopholes more slowly than lawyers find new ones. Companies determined to put the interests of their leaders ahead of their shareholders and employees will always find a way. Washington can only play catch-up.

David E. Sanger covers the White House for The New York Times. He is the former Tokyo bureau chief.