Jewish World Review Sept. 12, 2002 / 6 Tishrei, 5762
http://www.jewishworldreview.com -- Last year we watched in amazement as the New York Stock Exchange and Nasdaq reopened just six days after the terrorist attacks of Sept. 11.
Through a combination of strong leadership, round-the-clock work and rock-solid resolve, Wall Street and Washington achieved the seemingly impossible: rebuilding the exchanges' infrastructure and returning to a workplace just blocks from the continuing rescue operations at Ground Zero.
The task became even harder after the opening bell rang. The Dow plummeted 684 points - or 7 percent - for the session, and more than $1 trillion dollars in market value was wiped out that week.
But that day, it was the positive symbolism that prevailed. The markets were back open for business. The terrorists had failed to destroy our financial capital. We had won the first battle in the war against terrorism.
Now, much of that optimism, at least in terms of our financial system, has been severely eroded. The UBS/Gallup Index of Investor Optimism has fallen to 52 (from 124 when the index debuted six years ago), slightly above its all-time low, which was reached in July. That same index stood at 50 immediately following the attacks, but within a month it snapped back to a healthy 86.
What has happened? A breakdown in business ethics has shattered investor confidence in our corporate and political leaders and our markets.
In the past year, we've seen CEOs blatantly lying to shareholders about corporate results while collecting millions in out-of-control compensation packages. We've seen executives from firms like Enron cashing out their shares while keeping employees from doing the same in their 401(k)s. We've seen Wall Street analysts talking up stocks that they secretly admitted were "dogs." We've seen allegations of insider trading. We've seen an administration and lawmakers who apparently believe the tough issues in corporate reform can be avoided.
The uncertainty caused by this lack of integrity has placed a chokehold on the markets, already under pressure from the weak recovery and the impact of the terrorist attacks. Consider the Dow's performance following Sept. 11 compared with periods following other traumatic events in recent memory. One year after the 1987 stock market crash, the Dow was up 23 percent. One year after the 1993 World Trade Center bombing, the Dow was up 14 percent. One year after we entered the Gulf War, the Dow had gained 24 percent.
Today, however, the Dow remains well below pre-Sept. 11 levels, and the retirement savings of millions of American workers have been ravaged. In fact, the average 401k lost 11 percent of its value in 2001. That's on top of a 9 percent loss the previous year.
In the months ahead, we'll likely face much more uncertainty in the markets, as the Bush administration weighs going to war with Iraq.
With so many risks in play - from the threat of war to the weak recovery to the threat of another major domestic terrorist attack - our corporate and political leaders need to do everything they can to help rebuild trust in our financial system. Some positive steps have been taken, but there is still much more to do. Stock options must be expensed. The president should hold another economic summit, this time inviting the Democrats and encouraging debate. The Justice Department must put more corporate criminals behind bars and strip them of their ill-gotten gains. CEOs must be held to higher standards, and CEO pay must be brought back under control.
In the six days following an epic tragedy, our leaders on Wall Street and in Washington proved how much they could accomplish when they wanted to. That same resolve is needed today to restore integrity to our markets and our financial system. It's the least we can do to honor those died on Sept. 11 and those who are now risking their lives to prevent such a tragedy from happening again.