US President Bush called for doubled prison terms and aggressive policing Tuesday to combat fraud and corruption in scandal-tarred corporate America, promising to do "everything in our power to end the days of cooking the books."
Democrats faulted his proposals as inadequate and Wall Street investors yawned.
Bush, wearing a Big Apple lapel pin, traveled to the heart of Manhattan's financial district to respond to the corporate accounting scandals that have shaken investor confidence, threatened an economy struggling to recover from recession and called into question his own decades-old transactions as a private businessman.
"At this moment, America's greatest economic need is higher ethical standards - standards enforced by strict laws and upheld by responsible business leaders," Bush told a business-suited audience parsimonious with its applause.
"There is no capitalism without conscience, there is no wealth without character," he said, offering a prescription of prosecution for individual cheats rather than an overhauling of the fundamental system of business regulation.
Bush signed an executive order creating what he called a "financial crimes SWAT team" at the Justice Department, which had had no division charged solely with prosecuting corporate fraud. He proposed doubling the maximum prison terms for such fraud to 10 years and strengthening laws that criminalize document shredding and other forms of obstruction of justice.
He endorsed guidelines proposed by the New York Stock Exchange and Nasdaq to keep people with personal financial interests in a company off its board of directors or audit committee. And he sought a ban on private loans between chief executives and their companies.
He asked Congress for a stronger Securities and Exchange Commission - one with 100 new enforcement officers plus more investigators and an extra $100 million to work with.
"We will use the full weight of the law to expose and root out corruption," Bush pledged.
Goldman Sachs, American Express and ConEd were among the companies that bought tables at the luncheon organized by The Association for a Better New York, whose members include major CEOs in Manhattan.
Titters of knowing laughter rippled through the ballroom when Bush took after stock analysts who have misled clients in order to puff up stock prices. "`Buy' should not be the only word in an analyst's vocabulary," Bush said.
Stocks, whose indexes have dropped to five-year lows amid the scandals, continued to fall as Bush spoke.
"Investor sentiment and confidence in the market will only improve if they see some teeth behind some of these proposals," said Will Braman, chief investment officer at John Hancock Funds. "It will take more than just one speech."
Seth Taube, former SEC enforcement chief for the New York region, said increased prison terms will do nothing to deter misdeeds: "Businessmen care about money, not jail."
Mark Zandi, chief economist for the Economy.com consulting firm, summarized Bush's approach as: "All that is needed is to throw the bad apples out of the proverbial barrel."
"The problems appear more systemic, however, and require broader action," Zandi said, predicting that Bush's plan will do little more than "temporarily stanch the bleeding in financial markets."
A one-time oil company executive and longtime opponent of government regulation of business, Bush was elected to the White House with overwhelming support from corporate America. That support has become a liability with the recent months' cascade of business scandals: billions of dollars in hidden losses at Enron, a $4 billion discrepancy in the books at WorldCom, tens of thousands of workers out of jobs and retirement savings, CEOs refusing to testify to Congress.
Bush's own transactions while a director at Harken Energy Corp. in the early 1990s have drawn new scrutiny.
Organized labor, which recently began to look Bush's way on energy policy, is firmly against him on the issue that has suddenly gripped Washington this election year.
"From his first days in office, President Bush advanced legal and regulatory changes to loosen controls on big corporations," AFL-CIO President John Sweeney said Tuesday.
Congress' top Democrats - Senate Majority Leader Tom Daschle and House Minority Leader Richard Gephardt - appeared on Capitol Hill with out-of-work WorldCom and Enron employees to counter Bush's speech with their own "investor's bill of rights" announcement.
They insisted upon a new federal board to regulate the accounting industry.
Bush no doubt shares public outrage over corporate corruption, said Daschle, D-S.D. "The question is whether he is willing to take action on that outrage and support the legislation which will actually help solve the problem."
Bush spoke at a Wall Street hotel just blocks from where suicide hijackers struck the World Trade Center on Sept. 11 and he saluted the neighborhood's comeback as the kind of resilience he's hoping for in the American economy.
With November elections sure to hinge in part on the condition of the economy, a big part of the White House agenda on Tuesday was damage control.
Treasury Secretary Paul O'Neill told reporters aboard Air Force One that corporate scandal is only one factor depressing the stock market. He said today's market is "testing the lows that we hit after Sept. 11 and that's a basis for creating a foundation for another leap forward, above the highs that we've ever achieved."
Bush, too, made a case for confidence, citing steady growth in some economic indices. And he said the vast majority of businessmen and women "do not cut ethical corners."
(China Daily July 10, 2002)
