Almost too Good to be True

June 17, 2002

"Jail time for Wall Street crooks," urged Amey Stone in a recent BusinessWeek On-line article.

Wall Street crooks and lusty corporate tycoons find few friends in the press these days. As Eric notes above, even Martha Stewart's famously perfect dinner parties may have been sullied by negative press attention. Stewart is accused of doing things just a little too well - pulling her pastries out of the fire with such exquisite timing, like Hillary Clinton's cattle trading, it seemed almost too good to be true.

But Hillary Clinton traded cattle in a bull market. It was still "morning in America" when the First Lady and future Senator's cattle trades made the newspapers. Alas for poor Martha, the sun also sets. Today, there is still a bull market - but only in hypocrisy, memory loss, mock-indignation, sanctimoniousness, meddling, humbug, and buncombe.

We do not doubt that many in corporate America and Wall Street did wrong during the hey-days of the boom. Nor do we doubt that many more would have done wrong too - if they had been given the chance. The wrong-doers should get what they deserve, for that is the way of the world. The bull market in greed and grasping has given way. Now envy and retribution are ascendant. One follows the other like a hangover after a boozy night. To us, it is all very entertaining - and even morally uplifting.

But what sticks in our craw is the self-righteous carping and the "I told you so" subtext. We do not recall the newspapers complaining about Kozlowski's compensation when his stock was rising. Nor do we remember anyone in the mass media who was troubled by the way in which Tyco and other boom-era whizzes did business. Tyco - like Cisco and many others - built its business by buying other companies for more than they were worth - usually, on credit. The more they spent...the more debt they took on...the more their stock prices rose! It was almost too good to be true. But, in the press of the time, it hardly warranted a question mark.

For example, that very same Ms. Stone, who now wants Wall Street crooks sent to jail, was once a believer. On September 2, 1999, she believed that Cisco "Could Be the Safest Net Play Around." At the time, she gave the stock a "Slim Chance of Failure," noting that "analysts figure that there's virtually no risk that Cisco could be unseated from its top spot in the data-networking business." A "lull in the stock price could be an opportunity to buy on weakness," she concluded.

Now that investors have had nearly 3 years of dips in which to do their buying - taking Cisco down to $14.89, from it's March of 2000 peak of $82.00 - you'd think they'd be grateful. They can buy today what they lusted after almost 3 years ago...at an 82% discount.

Instead, investors, pundits, critics and kibitzers all seem to be going a bit sour. Instead of enjoying the opportunity to buy their favorites at reduced prices - Tyco was just $13.80 in yesterday's trading - they moan and kvetch...blame their losses on someone else...and call for Reform!

Most of the reform talk is merely empty-headed political grand-standing. But some of it is really crackpot. Thus did our office in Paris get a call from a Ms. Barbara Langer, founder of something calledwww.honestfinancialreporting.org .

"Corruption in accounting and securities is destroying the US economy and our legislature (Congress) is proposing laws to make matters worse," she begins. Then, she goes rapidly downhill.

"I am writing a draft law or bill to really fix the problem," she continues with the earnest sincerity of someone who has completely lost her mind...and then explains that she wishes to set up a branch of the FBI to scrutinize the books and calculate income tax on all publicly-traded companies. Plus, all accounts would be run through something "equipped with an automated forensic screening tool, which will empower investors and taxpayers, to evaluate all registered securities with state-of-the-art fraud detection free of charge!" We added the exclamation point ourselves, to give the proposal the dramatic flourish it seemed to deserve.

And why not? Heck, what could be simpler - put a few more thousand bureaucratic gumshoes on the case...and give them some new software with "forensic something-or-other" in it.

And jail time for Wall Street crooks? Heck, why not.

In fact, we've got a proposal of our own...take Kozlowski, Lay, Komansky, Blodget, Stewart and all the rest to the corner of Broad and Wall and shoot them in prime time. Better yet, make it a new TV spectacle - Wall Street Survivor, in which viewers get to vote for which one gets spared....a little like the crowd in Jerusalem that chose Barrabas.

Then, the stock market can put all this behind it and get on with its important business - taking money from the patsies and giving it to the insiders. In no time at all, Ms. Stone and the rest of the mass media can begin exalting its heroes again...Ms. Langer can get her name in the Congressional record and go to her grave thinking she made the world a better place...and American capitalism will once again be on top of the world.

It is almost too good to be true.

Your correspondent...signing off for the week...

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