Congress to Blame for Stock Market's "Dismal Performance”

NewsMax.com ^ | 8/2/02 | Carl Limbacher and NewsMax.com Staff

[NormsRevenge]

Friday, Aug. 2, 2002

Congress to Blame for Stock Market's "Dismal Performance”

The economy is in good, "if not great" shape, yet the stock market's "recent performance remains dismal" write TechCentralStation.com's James K. Glassman and John R. Lott Jr. who blame the situation on Congress.

In their article, "The Dow Congress," Glassman, a member of the President's Council On The 21st Century Workforce, and famed gun researcher Lott ask what is the explanation for a stock market decline in the face of a good economy and plenty of good economic news? Their answer: "politicians have entered the fray ..."

Congress, they contend has been "unanimously passing ill-considered, sweeping laws, driven by hysteria and misreporting. The sharp drop in the market, then, appears to be the result not so much of the accounting scandals as of the political reaction to those scandals."

And by using "overheated rhetoric to condemn capitalist evildoers and to denounce the 'binge' of the 1990s" - President Bush "only makes investors more nervous."

The media get a share of the blame, as well. "While financial markets, which rely on trust, cannot tolerate lying, the media have grossly exaggerated the extent and seriousness of accounting problems," Glassman and Lott explain.

But it's Congress that gets the lion's share of the blame for the stock market's precipitous decline according to the two men. They warn that the harsh and punitive measures enacted by the House and Senate could do far more harm than good.

Recalling similar measures taken after the 1929 stock market crash, they quote Richard Moody who wrote on Economy.com, that "the current environment calls to mind the aftermath of the collapse of the banking system during the Great Depression."

And although some of the steps taken then helped restore investor confidence, Moody said that "Congress also took the opportunity to impose a host of rigid and unjustified regulations on the operations of banks in the form of the Glass-Steagall Act," which, the authors note, "took more than 60 years to repeal. Imagine the similarly unintended consequences of what the president is now set to sign."

"The new accounting reform law creates Byzantine regulations where even honest managers could face prison time," Glassman and Lott warn. Forcing them to personally guarantee the accuracy of information in their company's financial statements "may seem innocuous enough, but consider that firms must frequently refile corrected statements not because of intentional deception but because new information has come to light."

Moreover all prosecutors would have to point out would be "two conflicting certified statements to show perjury or fraud. Making a simple mistake or being fooled by subordinates may not be enough of a defense. At the very least, CEOs will be wasting time verifying accounting statements, time better spent running a business."

They conclude by noting that "in the current environment, perhaps it is too much to expect politicians to stick up for the thousands of publicly traded companies that play by the rules and that have provided the United States since 1982 with the most prosperous two decades the world has ever seen."

They note that any executive rash enough to warn about the costs of what they called "the wild new laws coming out of Congress risks being portrayed as a corporate crook himself. But a little courage would be good to see."

Read more on this subject in related Hot Topics:

Bush Administration
Corporate Scandals
George W. Bush

[NormsRevenge]

"politicians have entered the fray ..."

Congress, they contend has been "unanimously passing ill-considered, sweeping laws, driven by hysteria and misreporting. The sharp drop in the market, then, appears to be the result not so much of the accounting scandals as of the political reaction to those scandals."

And by using "overheated rhetoric to condemn capitalist evildoers and to denounce the 'binge' of the 1990s" - President Bush "only makes investors more nervous."

The media get a share of the blame, as well. "While financial markets, which rely on trust, cannot tolerate lying, the media have grossly exaggerated the extent and seriousness of accounting problems," Glassman and Lott explain.

But it's Congress that gets the lion's share of the blame for the stock market's precipitous decline according to the two men. They warn that the harsh and punitive measures enacted by the House and Senate could do far more harm than good.

Fools Rush IN .. Where Brave Men Dare not Tread...

[cactusSharp]

want proof

http://ragingbull.lycos.com/mboard/boards.cgi?board=CGPN&startfrom=&numposts=30&board=CGPN&read=60733&x=13&y=5

notice the date...if I found this ,the congress knew too

[MurryMom]

...by using "overheated rhetoric to condemn capitalist evildoers and to denounce the 'binge' of the 1990s" - President Bush "only makes investors more nervous."

Glassman lets little Dumbya off the hook with much to little beratement, IMO. Dumbya and O'Neill used unrealistic economic predictions to sell their economic program to the Congress, but now they attempt to avoid responsibility. The puny presidential pretender makes investors nervous because his economic program is rotten to the core, not because of anything he's said. Just having Bush in office is enough to make me nervous, given his miserable track record of failure to add even a single net new job to the economy in 18 months.

[uncbob]

Stock market is OVERVALUED and nothing but a speculative gamblers game

People who bought in weren't looking at dividends in relation to cost

Might as well take your chances on baseball cards

Nobody be crying if the bottom fell out of the baseball card market

[mrs9x]

So you would rather have Gore in the White House? Are you from DU or something?

[kaktuskid]

Yeah OXY ALgore and Citigroup/Enron Rubin are better..

[always vigilant]

The government doesn’t create jobs it only hinders the growth. The economy is still licking its wounds from the previous embarrassment of an administration (the one democrats worship on their kneepads). The best thing the government could do is to reduce the prohibitive tax burden. Let me keep the money and I will generate jobs.

[Billthedrill]

Glassman lets little Dumbya off the hook with much to little beratement, IMO. Dumbya and O'Neill used unrealistic economic predictions to sell their economic program to the Congress...

Congress controls spending no matter who's doing the "selling." That's the point of the article. Blaming the president for the economy is as foolish and futile as giving the previous one credit for it.

[Diddle E. Squat]

FYI, MurrayMom is one of Free Republic's oldest liberals, spouting lies and then running away since 1998.

[RightWhale]

The government doesn’t create jobs it only hinders the growth.

What is the purpose of government?

Once at a townhall meeting I said the purpose of government is to prevent runaway economic growth, and damn if 2 out of 3 in the room didn't nod in agreement. Starting to think that any tautology will be accepted as the deepest wisdom.

[NormsRevenge]

Good read .. Thanks.

Very thought provoking.

Folks , it's a snapshot of the vicious circle we are currently in ... A few minutes read , well worth it.

Just don;t blow any blood vessels.

[iranger]

Whats in you economic plan, momma?

[mountaineer]

beratement?? Is that a word?

[mewzilla]

Um, MM, in case you hadn't noticed we're kinda like at war. Needless to say, nobody budgeted for that or it's impact on an economy that started hitting the skids when oil prices rose during the end of Toon's admin. Cut the Prez some slack. Nobody's going to refloat the economy over night.

[uncbob]

The nation is heading straight into a 1932 style depression

That might be the only thing that brings economic sense to the American people ( if it doesn't issue in communisn/socialism/etc)

We have a credit card economy with people owning 3 or 4 cards maxed out, two people working to buy large houses with smaller families, and playing the stock market like the black jack tables in Vegas
The Piper is going to get paid sooner or later.

I doubt Bush could talk sense to the American people even if he realized what it was

We have grown fat dumb and happy and used to instant gratification without any practice of frugality etc etc

[SteamshipTime]

A billion dollars a month to bomb a bunch of ragheads armed with rusty Enfield rifles and 20-year old Soviet-era light infantry arms?

Hundreds of billions for a redundant bureaucracy to coordinate the bureaucratic meanderings of other bureaucracies?

Billions for education, billions for agriculture, billions for the blue-hairs...

Gimme a break!

[cactusSharp]

I sent it to Rush@eib.net too but o'le
Rushbo hasn't indicated he read it or not :(

[SteamshipTime]

The economy is not "in great shape." The economy is extremely fragile and could even collapse. The economy is struggling to produce despite the weight of trillions and trillions of inflation-soaked dollars which foreigners are beginning to suspect might serve better as wallpaper and $33.1T in government debt. Combine that with the debt included in the current account deficit and the other trillions of dollars in corporate and individual debt. We are taking out debt to service debt, which means that our capital stock has been exhausted and we are mortgaged for far into the future.

Investors know this, which is why they're suspicious of paying $25-$40 or more for every $1 of a company's earnings. They know that there are no "greater fools" to sell to at those prices.