"The good news," said President Bush after hearing of the WorldCom meltdown Wednesday, "is most corporate leaders in America are good, honest, open people who care deeply about shareholders and employees."
His remarks, made in Calgary, Alberta, where he was meeting with leaders of eight top industrial nations, were designed to reassure global financial markets as well as American investors. He's spitting against the wind.
Most companies may be honest, but wary investors don't know who the honest ones they are. And there seem to be enough dishonest ones to suggest there's a pattern of deceit or fraud among some segments of Wall Street.
Look at the roll call of high-flying companies once considered Wall Street darlings that have recently been rocked or sunk for cooking the books: Enron, Global Crossing, Sunbeam, Tyco International, Qwest Communications, Adelphia Communications, ImClone and now the biggest of all, WorldCom.
The billions of dollars in shareholder losses are staggering. WorldCom's value alone has tumbled from $115 billion to less than $1 billion.
The crisis in confidence became a theater of the absurd when some former Enron female employees posed nude for the current issue of Playboy - "to prove we have nothing to hide."
Investors at home and abroad aren't asking, who's honest? They're asking who's next? And even if they want to invest in an honest firm, they can't be sure the stock analyst isn't hyping a fraud. Not even Martha Stewart can be trusted - or the U.S. dollar either, for that matter. What had been the world's strongest currency throughout the 1990s is sinking as fast as the stock market.
Clearly, the nation is facing one of the worst crises of confidence in U.S. capitalism in history.
The task of the Bush administration and Congress, then, is to restore confidence. It won't be easy. Trust, which can be destroyed overnight, can only be built over time. Here are some steps that could be done quickly to get the process started.
Prosecute corporate cheats and thieves to the full extent of the law. No country club lockup for these billionaire swindlers; let them find out what it's like in a maximum security prison with penny-ante bank robbers.
Increase the budget for the under-funded, under-staffed and overworked Security Exchange Commission, the agency charged with enforcing market integrity and protecting investors.
Pass pending SEC-recommended legislation that would ban accounting firms from having a business interest in the companies they audit and require chief executive officers to personally vouch for the truth, timeliness and fairness of their companies' financial statements.
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