Summer Of Mistrust

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His allies' hearts sank as Bush stood at a press conference swatting at questions about his own past. He had joked his way through a 30-minute prep session earlier in the day, as if to assure his aides, Not to worry; he had this stuff under control. But he did not. "In the corporate world," he declared when pressed about how Harken Energy had hidden losses while he was on its board, "sometimes things aren't exactly black and white when it comes to accounting procedures." It was a defense that only an Arthur Andersen executive could love. The President whose wartime rhetoric runs to all or nothing was making a case for relativism; his business experience was being channeled not into a call for probity but into an excuse for conduct he would declare unethical in a speech the next day. "He can't go where he needs to go," concedes an Administration official. "He is an insider, and he comes across as an insider offering only lukewarm populism."

By the time he arrived on Wall Street to declare that "there is no capitalism without conscience; there is no wealth without character," the markets had shorted his speech. The Dow dropped 179 points by the end of the day. By now people know that capitalism is a spectacle of hope and greed and guts and guile, all racing toward the bottom line. That is its genius, but without guardrails, the whole contraption can take us over a cliff. On Wednesday the Senate voted 97-0 for a program far tougher than the one the President had proposed and even the Republicans in the House were climbing aboard. Unless Congress and the President get serious about reform, Senator John McCain warned in a combative speech, "the damage done by these scandals will outlive most of us in this room."

History may not repeat itself, Mark Twain said, but it often rhymes. As the markets growled, historians recalled the grisly years of 1973-74, a downturn driven not just by a sick economy but by disillusion over everything from Vietnam to Watergate. This too is a summer not of one scandal but of many--the Roman Catholic Church, and the FBI, and Major League ballplayers on steroids. Comedians joke that Arthur Andersen tries to cover up corruption by rotating accountants from diocese to diocese, that Enron and K Mart will merge so Martha Stewart can design the prison uniforms. In each case it is the mighty who have fallen. The church scandal was as much about complicit Cardinals as about wayward priests; the FBI field agents did their job, but their careerist bosses stuffed all the clues into their desk drawers. As for the CEOs, they raid company coffers to pay off margin calls or build new mansions; awash in options, they manage the stock price instead of the company; as their business falls into bankruptcy and the layoffs pile up, they float away on golden parachutes--or yachts bought with company loans. "I've fully understood that they don't always necessarily have my interests at heart," says Dan Brown, a Seattle software-company owner, "but to be out there to rob me, that bothers me." Even criminals look for honor among thieves--and find the greedheads wanting. Mike, 20, a former drug dealer in Seattle, says that not even pushers can lie so blatantly to their clients. "People have to be able to trust you, know that you're selling what you say you're selling," he says. "If I had lied like [the CEOs], I would have been out of business."