Wall Street's Verdict

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That said, the White House knows it must do something, because the Democrats are getting saucer-eyed over November's congressional elections. According to Roll Call, House minority leader Dick Gephardt recently spoke with senior Dems about the corporate crookery, saying that "if this thing plays out right, we could pick up 30 to 40 seats." Bush is desperate to show voters that he is not deaf to their concerns, but he has not found the message. "He wrapped his arms around this market," laments a senior Administration official. "Now he owns it."

Bush is at least saying many of the right things. In his Alabama speech he stressed the underlying strength of the economy and pledged to lock up the crooks: "I'm willing to work with Congress to make sure that we've got the necessary law in place that will hold people accountable without stifling the entrepreneurial spirit of America."

That last phrase looms large in Bush's thinking. He resisted much of what the Senate proposed until the political pressure became overwhelming. He is now urging Congress to pass quickly the reform bill, which stiffens penalties for fraud and increases funding for the SEC, whose budget growth he had limited in February. Whatever legislation Bush signs will not address the widespread use and misuse of stock options, which have been cited as one of the main culprits of the market bubble and accounting legerdemain: the higher a company's reported profits, the higher go stock prices, and the more quick money option-holding executives get. Aides say that when they recently discussed with Bush the proposal to require that stock options be treated as a business expense, like other forms of compensation, he held forth at length on why it was a bad idea. Many of his corporate campaign contributors would agree, since expensing options would initially cause earnings to appear lower. Silicon Valley companies, in particular, are pushing hard against it, arguing that start-ups would not be able to attract talent.

The Administration's effort to seem concerned was not helped by Army Secretary Thomas White's appearance before a Senate committee last week. White, a former top executive at Enron, denied that he had a hand in manipulating energy prices in California while vice chairman of Enron Energy Services. Under verbal torture by Senate Democrats, he also had to explain his 77 phone calls from Washington to top Enron associates as that company was disintegrating — and as he was netting $12 million in Enron stock sales and as the war in Afghanistan was at full throttle.

Amid that kind of background noise, neither Wall Street nor Main Street is tuning in to Bush right now. For investors big and small, "it's a matter of reconnecting the metric — company to industry to economy — that's missing today," says New York Stock Exchange (N.Y.S.E.) chairman Dick Grasso. And that may be beyond Bush's capabilities, as well as the public's expectations. The N.Y.S.E. is hurrying up new regulations to give independent directors more control of the companies in their care. And Grasso is looking past Labor Day for investors to reconnect with fundamentals, especially as third-quarter earnings reports, which promise to be the most squeaky clean in history, start to surface.

In the meantime, it threatens to be a long, hot, money-losing summer for the rest of us, whether or not the President is watching closely.