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NYSE Chairman: Bad Corporate Practices To Be Amended - 2002-07-23


U.S. stock markets have been seesawing during the day, despite showing early signs of a slight rebound. Investor confidence shows little sign of returning. Concern about fraudulent accounting practices continues to roil U.S. markets. Day after day, Wall Street investors ask how low can the market tumble before it starts to recover?

Shares of the two largest U.S. banking companies, Citigroup and J.P. Morgan, dropped after a report in The Wall Street Journal newspaper that the firms may have devised for other companies the same type of deceptive transactions that caused difficulties for the now-bankrupt Enron Corporation. Investor concern about bank loans to WorldCom, which declared the largest bankruptcy in U.S. history Sunday following an accounting scandal, also contributed to losses in the banking sector.

Congress, federal government regulatory agencies and the equities industry are undertaking initiatives to restore public confidence in the markets. The government is insisting that 1,000 corporate chief executive officers certify the accuracy of their companies' financial statements by August 14. The chairman of the New York Stock Exchange, Richard Grasso, said these measures should end what is being called the crisis in investor confidence.

"I believe there is a powerful platform of reform that has been proposed. The pubic will then return to looking at the marketplace from the standpoint of fundamentals. How is the economy doing? Answer is: strong. Where are interest rates? Answer: 30-year low. Is there inflation? Answer: non-existent. So I think we are going to put the bad people out of the system. Bad practices are going to be amended. We are going to get back to business," Mr. Grasso said.

Mr. Grasso said further investigation may expose more wrongdoing. He said the challenge for the business community is to remove the perpetrators from the system.

"I cannot tell you the amount of anger that exists in the corporate community over the misdeeds of those who have misled the public and their investors. We are going to root them out and punish them. I cannot say that there will not be others to come. I can tell you, please remember, there are 15,000 publicy traded companies in America, the best capital markets in the world. Are there some bad apples? Clearly,yes," Mr. Grasso said.

Most importantly, Mr. Grasso said, investors should remember the vast number of U.S. companies play by the rules.

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