Dow drops to 5 year low after speech
 

The White House 'finally' decided to address rampant accounting scandels created when the Clinton administration was not permitted to address the problem (blame the Republican party leadership, Sen Tauzin (R-LA, Sen Lieberman (D-CT) among others who threatened to cut off all spending if reasons for scandel were addressed). The Dow Jones rose 35 points in expectation that the President finally will address the problem he had ignored for so long. As of today, the Dow has since dropped 400 points mostly, according to most business reporters, because of a pathetic speech by the President. He did not confront the problem.

How many scandels does it take to get this President's attention? Waste Management, Sunbeam, Tyco, Adelphia, Global Crossing, Enron, the CA energy crisis created by accounting scandel of energy trading companies, Xerox, Haliburton ... How many did he ignore before he finally decided maybe there is a problem in the same corporate America that contributed most to his campaign funds? Even Sen John McCain (R-AZ) has cited the President for too little too late.

It is what the President did not say that are so much part of the problem - resulting is a dropping Dow.

First, he did not challenge those in Congress who encouraged (after campaign contributions) this fraud that Arthur Levitt (Clinton's SEC commmissoner) was complaining about so loudly.

Second, he said that corporate executives should maybe serve a maximum sentence of only 10 years instead of the current max of 5. He provided no means for those prosecutions to be conducted - which is the real problem. Take the Arthur Andersen trial where the jury could not even agree with prosecution arguments that David Duncan of Andersen ordered massive shredding of Enron documents. Laws make it almost impossible to convict for intentional destroying of the evidence? Yes. Only because the bottom line was so obvious, the jury finally achieved consensus by constructing its own theory centered what was deleted from a Mr Duncan internal memo.

How are any companies to be convicted if even Arthur Andersen's massive document shredding, to hide their criminal intent, cannot be prosecuted. This is what George Jr would have you forget when instead he raises possible jail time to a trivial 10 years. George Jr calls that tough and hopes you don't see what prosecutors have been complaining about for years. Fraud is almost legal because it is so difficult to prosecute. It is why most prosecutions are plea bargined into trival sentences - such as the ones for Milkin, Boskey, et al.

Third, the accounting industry claims it is not required to find fraud. They claim disclosure of fraud is the responsibility of the audited company - not the auditors. This, BTW, has always been the contention of my MBA friends from (what was then) the big seven. They claim an auditor cannot uncover intentional fraud and therefore should not be held accountable when they fail to do so. But if they suspect the books are not valid - simple to do by statistical sampling - then they don't have to put their stamp of approval on the audit. This, they counter, would result in loss of business. Too bad. What is more important? The credibility of the audit or a loss of some companies that manipulate books by making them unnecessarily complex?

If they are using complex accounting, then either they fix their accounting, or not be approved by the auditors. No big deal IF we hold the auditors responsible for their own work. But the President does not want to do that.

George Jr did not provide prosecutors with tools to enforce existing laws - something they desperately want. George Jr did not call for accountants to be responsible for their audits - to not sign off on books they suspect are tainted.

Then there is Point Four - the most damning. Most of those cooked books are proper according to the industry's own standards. The accounting industry does not have to answer to any other powers. Any industry that cannot police itself must be regulated by governement. Like it or not, those are the lessons of history. However George Jr refused to require the industry subscribe to an independent standards board. Instead, the foxes are allowed to continue writing their own regulations - which is the biggest problem. George Jr also ignored that problem.

One reasons why overseas companies do not have all these cooked books problems is that their audits must be based upon the IASB standards - an international standard for accounting that does not permit, for example, stock option problems so prevelant in US accounting practices.

Point Four is the killer. George Jr made no effort to address the biggest problem with corporate accounting - standards written by an industry more concerned about their own business than the credibility of their product - the audit. The foxes run the henhouse - write accounting rules as they feel are acceptable. Point four alone is the biggest problem with the accounting industry - that were some of George Jr's bigger campaign contributors. Accountants should have been held responsible for any audit they sign off on. Accounting standards must be set by a board indepenent of the industry - an industry that has claimed for over 30 years that it need not be held responsible for their audits. And laws to make corruption prosecutions possible must be enacted. Geroge Jr called for none of this in his pathetic speech on Wall Street yesterday.

BTW, this is the same President who said it is safe to invest Social Security in the stockmarket. Do we now forget what he said?

Those who perform real prosecutions of fraud, such as New York's prosecutors,find it incredulous that George Jr said nothing to address the corporate scandels - after staying quiet for so long.

In the mean time, two more cooked books have been exposed. First is Qwest - rather a surprise. But the White House has apparently run out of terrorist threats to mask another corporate scandle. VP Cheney and his company were sued today for cooking Haliburton's books. Maybe that is why George Jr's speech was so soft on and helpful to corporate book cookers. His own people AND his campaign contributors are both suspects.

I agree that GWB didn't go far enough, and so do investors (obviously). But let's keep things in perspective. Are stocks a good place to put your retirement funds?

http://cellar.org/2002/dj.gif

This graph includes yesterday's drop. Doesn't include today's, which looks like another barn burner. But even if the Dow loses a THIRD of its value as of now, it will only be back to 1997 level.

Now, I think the idea of moving SS simply into index funds in the stock market is drop-dead dumb. I'd rather give the people the ability to move their money however they like. Even the ones who are going to put all their money into electric pen sharpeners and whatnot.

I also think that putting the entire scandal on Bush is wrong. Obviously the "bubble" happened on Clinton's watch. If one honestly believed that the President can do much at all about the economy, then we'd have to point out that CEOs were doing most of their scandalous tinkering during the previous administration. The current scandals are about things put on the wrong side of the books five years ago. We'd all have to agree that about half of the "Clinton economy" was a sham.

But I don't think the pres can do all that much about the economy. I think the natural business cycle just happens and whomever is in office during a boom should count themselves lucky.

Hey looky that: as I was writing that screed, the Dow rose 100 points.

I'm going to use that as evidence that I'm right?

You're right UT...the stock market shouldn't be tied to a president's success or failure. But we know that inevitably it will be...Dubya's dad is a perfect example. And one of the polls I've seen shows Dubya's handling of the economy at a 55% approval rating right now.

And why? Probably because most folks aren't intelligent enough on how our economy really works. Granted, there are some folks that are influential in how the economy plays (Greenspan, the Secretaries of Commerce, Treasury, Agriculture, etc.), but there are so many factors to consider that it seems impossible to point the finger at one source. For that matter, blaming the current situation solely on companies like Enron, Global Crossing, WorldCom, etc. seems silly.

It's all about the mindfuck. I don't want to deny the Stock Market the importance that it plays in our economy, but it's so amped on the psychology of all the players involved in trading, analyzing, etc. Let the market ride its highs and lows as it should...the results of the past 20 years speak for themselves...and it can't be due to just sheer hype.

Putting SS funds where they get a better return is not even relevant. The government needs SS funds to raid for cash - to keep the government running - to play cash flow games. Investing SS funds in the stock market is pushed by those who would count on public ignorance to appear politically superior at the expense of America's future.

It is quite foolish to blame the Clinton Administration for something they saw coming, and yelled loudly about avoiding. Posted were the people first responsible for this mess - those who threatened to gut the SEC if it addressed the problem we now have. Nowhere were Clinton nor George Jr initially blamed. Listed for blame were:
However after Sunbeam and Waste Management, it was clear that fraud in accounting was suspect and not being prosecuted. I may have reposted an article about it just after the Sunbeam scandel and before Bush was elected - including discussions of the various accounting standards boards. We had facts that something was askew back then. Arthur Levitt of the Clinton Administration was shouting so loud that the above Congressmen, et al threatened him to quiet him.

However George Jr stayed silent when in power, stayed silent even after Enron, and stayed silent when it was apparent that even Cheney would be suspect for cooking books. He stayed silent because addressing the problem would have caused problems for so many of his friends - who ARE the problem. George Jr stayed silent and did nothing to address a problem that he could have confronted long ago when the CA energy problem existed. But in each case, they were major campaign contributors to George Jr. Best stay silent about those who legally bribe the government.

George Jr all but still remained silent. His speech was about protecting the guilty by inaction. He deceives a naive public to think he is finally addressing the problem when in reality he still ignores reasons for the problem.

George Jr is not the original reason for the problem. George Jr simply contributes to the problem - as his speech only demonstrates. A problem that Clinton's people tried to solve but instead were threatened.

Ironic that George Jr protects by inaction those who commit outright fraud in corporate America and protects those who would be bankrupted because they stifle innovation. These are classic actions of an MBA mentality. It just absolutely amazes me how this man can continue to operate contrary to interests of America - and not be condemned for his hypocracy. It demonstrates power of the 'bully pulpit'.

Just out of curiosity tw, did Clinton or his friends ever do anything wrong?

For that matter, have Dubya or his friends ever done anything right?

Ummm... Nothing that rings a bell.

Well, I guess I thought the same thing about Clinton for those awful eight years, so I can't say I don't know how you feel.

But it sure is more fun to have a good president than having to be righteously indignant all the time. Requires less energy, too :)

Hell, I'd settle for being left alone...

I'm curious, what do you think W has done right? I don't believe that our current polical system can allow for a good president. Maybe Jesse Ventura will run...

Fat chance. He got his feelings hurt in Minnesota...no way he could handle a national press.

yeah, I think the Rock or Hulk Hogan would have a better chance anyway...

Come on warch...I know you just LOVED Ventura. ;)

What 'cha gonna do Osama when these 54-inch pythons run wild over yoooooou?

or...

The Rock thinks that terrorists are candy-asses, and will layeth the smackdown upon them.

(The Rock's not old enough yet though. He just turned 30. Gotta be 35.)

The whole reacting-to-9/11 thing. I shudder to think of what Gore would (or wouldn't) have done.

And although I agree to an extent that our political system discourages good leaders, we are obviously talking about two separate things if you think Jesse Ventura is a good example of that.