Could more regulation have prevented the collapse of Enron Corporation, the huge energy and online trading company that last month became the largest company in history to declare bankruptcy? That is the question the Senate will pursue in Governmental Affairs Committee hearings that start January 24. The unexpected and sudden failure of the Texas energy giant, the seventh largest company in America, is, in committee chairman Joe Lieberman’s (D-Conn.) words, "an alarm call to all of us in government." Enron was known for the millions it spent buying influence on Capitol Hill as well as for the aggressive pursuit of deregulation and regulatory exemptions in its energy trading business. Questions are being asked about what favors, if any, Enron got from the Bush administration.

The Houston-based company declared bankruptcy just weeks after accountants revealed that Enron had been overstating its profits for four years. Lost were $60 billion of shareholder investment, forty-five hundred jobs, and the savings of thousands upon thousands of workers and retirees.

Pension-fund mismanagement, stock fraud, the breach of fiduciary responsibility in favor of personal enrichment, dubious accounting practices-these are the major lines of inquiry into the complex Enron debacle. Lieberman’s committee promises a full look in order to restore confidence in the public accountability of business and publicly traded stocks. Lieberman’s committee is not alone. Enron is under criminal and civil investigation by the Justice Department, the Labor Department, the Securities and Exchange Commission, and at least four other congressional committees, so far.

The federal investigations may produce criminal charges. They may also precipitate new federal regulation, especially of accounting practices and employee retirement accounts. Although a full account of Enron’s failure will take months or years to sort out, it is clear that the corporation-and its investors-would have benefited from more vigorous oversight. As Scott Appleby writes of the chaos that enveloped Russia in the aftermath of the Soviet Union’s collapse (page 25), the foundation of democracy and economic prosperity lies in the rule of law and effective regulatory institutions. The siren call of "deregulation" must be evaluated with that fact in mind.

Senators Barbara Boxer (D-Calif.) and Jon Corzine (D-N.J.) are already drafting pension-law reform to protect workers blindsided by the outrageous conduct of Enron executives. While ordinary employees were barred from selling company stock from their 401(k) pension accounts, Enron big wigs cashed out more than a billion dollars in stock before the collapse. They’ve walked away rich, and the rank and file poor. "We have been lied to and we have been cheated," one angry Enron employee testified to the Senate Commerce Committee. Limits need to be placed on the amount of stock that employee pension plans hold in their own companies.

Protecting pension savings plans is not the only reform the Enron debacle puts under consideration. Accounting industry critics note that where accountants once clearly served the public interest by checking the books, auditing has become a marketing tool to sell "consulting services" such as computer systems, advice on tax shelters, and business strategy evaluation. In the past twenty years, consulting has grown from 13 percent of the auditing business to 50 percent. Can auditors simultaneously serve management and the public? Will they scrupulously evaluate their own creations?

The Enron case gives these questions added force. Last year Enron paid its longtime auditor, Arthur Andersen, $25 million in auditing fees and $23 million in consulting fees. Andersen has yet to reveal the details of its work on Enron’s deceptive off-balance-sheet transactions. Nor is it likely to. According to the firm, a "significant but undetermined" number of documents and electronic files related to Enron have already been destroyed. Still Andersen’s CEO has admitted to one congressional committee that "real change will be required to regain the public trust."

Debates about 401(k) rules and accounting are not exactly high drama. But if Lieberman’s committee traces Enron’s Washington connections plenty of drama will follow. Over the years Enron chairman and founder Kenneth Lay, who transformed Enron from a natural gas pipeline company to the leading online trader of energy and other things, invested millions of dollars in lobbying federal officials-and financing their political campaigns-to privatize and deregulate the energy industry. Enron and Ken Lay were President George W. Bush’s biggest corporate backers, and have been since his first run for Texas governor. Lay served on the Bush presidential transition team and interviewed candidates for the Federal Energy Regulatory Commission (FERC), which oversees the gas pipelines and electricity grids that were key to Enron’s business. That raised the hackles of outgoing FERC chair Curtis Hebert. And Lay had unusual access to Vice President Dick Cheney during the formulation of the administration’s shockingly maladroit energy policy. Lieberman says the Senate wants to know "whether the advice rendered [by Lay] was at all self-serving." Recent efforts to roll back air pollution regulations indicate how influential the energy industry has become in the Bush administration.

Although the Senate’s investigation will look at Enron’s high-level political connections, the inquiry, Lieberman says, will not be a "witch hunt." Good. Nor can it be a strictly partisan affair: Though President Bush had a particularly cozy relationship with his fellow Texan, Lay also golfed with Bill Clinton. While 90 percent of Enron’s political donations went to Republicans, it gave to key Democrats, among them Senator Jeff Bingaman (N.M.), chair of the Senate Energy Committee, and Senate leader Tom Daschle (S.D.). A week before declaring bankruptcy, Enron donated $100,000 to the Democratic Party committee that helps Senate candidates. Where is campaign finance reform when we need it most?

Enron’s colossal failure may help clarify a long list of questions. As the criminal and civil investigations begin to shed light (and heat), the issue of deregulation itself should be subject to new questioning and skepticism. A new energy bill has just been introduced in the Senate. The bill intends to widen the trade deregulation that Enron lobbied so hard for and by which its corporate leaders benefited. Will Congress have the energy to speak in the public interest this time?