Hoover Daily Report

Bush's Wall Street Reform Program Merits Support

Monday, July 29, 2002

When a thief shoots and kills an innocent bystander or one Mafioso offs another Mafioso, the effect of such homicide is limited to the immediate family. But when a corporate executive fiddles with the corporate books, millions of innocent people are affected—people who were looking forward to retirement living on something better than Social Security.

Of course, there can be no guarantee of eternal profits and a forever bull market. You accept the stock market's verdict because you trust the numbers; you and your investment advisers trust the balance sheets, the income statement, and the listed assets. Millions of people go to Las Vegas every year even though the odds are against them because they half-trust the spinning roulette wheel or the blackjack dealer. Is it possible that the games in Vegas are more honest and more ethical than some of the stocks listed on the Big Board or the Nasdaq?

Working people and middle-class professionals have been encouraged to put their money in stocks and mutual funds so that one day they would enjoy the good life. According to the World Bank, more than 50 percent of Americans have invested in the stock market. Fareed Zakaria, in his book From Wealth to Power, says such investments have quadrupled in value in the last decade. In October 1999, the Washington Post ran a story about the stock market headlined "Investing's Changing Face: Women, Blacks, Hispanics and Others Are Reshaping Wall St." At that time nearly half of Americans were invested in the stock market, many of them between nineteen and thirty-five years old. Investing had become a mass movement in America. Will such participation continue?

There's no point in saying there will always be crooks and suckers. True, most of American business is run honestly; dishonest CEOs and swindling accountants amount to only a handful. Yet look at how this handful has contributed to a meltdown affecting jobs, investment returns, and portfolios. That is why President Bush's reform program deserves support by Congress.

At the end of World War I, John Maynard Keynes wrote in his masterwork, The Economic Consequences of the Peace: "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

Today, when millions and millions of Americans are investing their life savings in bonds and equities, we might update Keynes: There is no subtler, no surer means of overturning the existing basis of society than to debauch the securities market. The process engages all the hidden forces of economic law on the side of destruction and does so in such a conspiratorial manner that not one man in a million is able to diagnose what has happened until it is too late.