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The problem with the stock market is not corporate fraud. Almost all the "frauds" happened when a failed business plan was kited to make it look better. Most of the "frauds" stocks were dropping like rocks months to years before the "fraud." Some of the "frauds" are not frauds. Just look at Merck. They sold their pills in drugs stores. They took the revenues as revenues and expensed the co-pays which the druggist kept. Now they are charged with falsely claiming more revenues than they had because the druggists kept the co-pays. Actually, a financial statement such as this is a judgement call and, in any case, the income statements in both instances are the same.

The problem with the stock market is valuations. In 1996 Alan Greenspan said the market suffered from "irrational exuberance." At the time the DJI was about 6-7000. Instead of cutting back on the money supply he boosted it because of a series of international problems. By 1999 the money created was "inflating" the stock market by increasing the valuations such that the S&P 500 P/E was over 40. Then good old Alan suddenly increased short-term rates to 6.5% to "fight inflation." Of course there was no inflation. In spite of reducing short term interest rates faster and farther than at any time in history, Alan has kept increasing M3 and, if he ever ceases, expect another major down draft in the market.

In short order, the market tanked and investors (to date) have lost 7-8 trillion dollars; however, the S&P 500 P/E at the end of June 2002 was still 26. The average P/E for the S&P 500 has been 13.5 over the years and 7 at the end of a bear market.

Teddy Roosevelt once said whenever the common man loses his money he becomes like a snake and strikes out whoever is at hand. Remember, Herbert Hoover was elected in 1928 and took office in March 1929 and the market did not crash till the Fall of that year. No one blames Cal Coolidge (his predecessor).

I believe President Bush is going to be blamed. If he wanted to do something he could urge Congress to kill the one million dollar tax deductible limit on executive pay which was passed by the Congress in 1993. This was would be far preferable to the "McCainiacs" proposal to expense stock options. Expensing stock options will result in lower earnings and valuation of the stock market; hence, another reason to tank further. Stock options became a problem when corporations switched these when they could not adequately expense their salaries for IRS purposes. Also, the President could mention that the politics of envy are not only destructive to society and capitalism, but they are prohibited in the 10 Commandments. These two little efforts would actually help the market. Bashing CEO's is just another mistaken deflection of blame and reason.

Very thoughtful, unlike the following

In the nineties everyone had a piece of the action but no one took the time to reseach what they were buying nor paid attention once they bought it. We new in our gut that something wasn't quite right in Silicon Valley but what the heck. Now we're having a shake out after the greatest bull market in history.

I do agree that some people need to be prosecuted and that includes members of the board of directors who have fiduciary responsibility to the stockholders. We don't need more laws. We don't need class warfare. I recall that the Great Socialist, FDR, wanted to limit salaries to $25K. We do need stockholders paying attention to what companies are doing with their money. Damn-there's that personal responsibility thing again.