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Bush Speech Fails to Inspire Wall Street Investors - 2002-07-09


President Bush's address on corporate responsibility Tuesday failed to inspire Wall Street observers or the Dow Jones Industrial Average, which continues its steady downturn.

Greg Valliere is managing director of the Schwab Washington Research Group. His reaction to the president's speech was echoed throughout the business world. "I thought the sincerity was great, I thought the tone was great, I thought it was well delivered, but my gut feeling is that there wasn't a lot of meat on the bones," he said.

The president proposed giving an additional $100 million to the Securities and Exchange Commission, the federal agency that oversees U.S. business activities, to aid it in enforcing existing laws. He also recommended the criminalization of document-shredding, and doubling the maximum jail-term for mail and wire fraud to 10 years.

William Niskanen, chairman of the CATO Institute, a non-profit public policy research foundation, says that these measures are not enough to restore shareholder confidence after a series of accounting scandals that have rocked the U.S. business establishment. He also says the president skimmed over the specific changes in the law Mr. Niskanen thinks are needed to stop future abuses.

"We have to change our tax code to reduce incentives for unusual debt, to reduce incentive for unusually risky behavior," he said. "We have to change our rules for corporate governance to reduce the discretion of corporate managers to act in ways that do not serve the interest of corporate shareholders."

Tara Alcantar used to work for WorldCom, which recently sent shockwaves through the market by revealing major accounting discrepancies. She, too, is skeptical about the far-reaching impact of the president's speech.

"Actions speak louder than words. I hear a lot of words, but I don't see a lot of action," she said. "I'm not sure if real action is taking place, or if the same things are being said and there's not really going to be a change."

But the skepticism voiced by Ms. Alcantar and most Wall Street observers, is not universally shared. T.J. Rodgers, chief executive of Cypress Semiconductor, is impressed by the president's stance.

"He had two plans: One, let's report more clearly and deeply than we've done before. The second thing he said, when people do break the rules, we're going to get tough on them, we're going to put them in jail," he said. "That's fine with me. Put the crooks in jail."

The New York Stock Exchange is itself proposing measures it hopes will contribute to reform, including the regulation of stock options awarded to corporate higher-ups.

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