Dan Rather I REMEMBER a conversation with a friend who likes to play blackjack. He was telling me that he never bets much, but when he does lay his money down, he likes to do so in Las Vegas. "It's the gambling capital of the world," he said. "It has to be honest."
What Las Vegas is for him, Wall Street has long been for anyone looking to buy a stake in the great game of capitalism. Wall Street has a history of inspiring investor confidence. The reasons are many, not least of all the fact that these financial markets are in the United States, with all that implies in terms of security and probity. But on a gut level, you could say it boils down to Wall Street's size and high profile. Like Las Vegas, it has to be on the level, right?
Right?
With each new revelation of double-dealing at the big table, the American public and the world investment community become increasingly inclined to answer in the negative. First it was the corporations, then the accountants. Now, if the allegations of the Senate panel investigating Enron are true, it's the bankers as well: J.P. Morgan Chase and Citigroup stand accused of issuing loans to Enron designed to help it hide its operating expenses.
Wall Street is located in lower Manhattan, but it is also a place of the mind. It is the idea of the free market expressed in pure form, the laboratory and engine of capitalism. It is also the sum of the corporations traded on the financial markets, the accountants who sign off on their numbers and the banks that make the deals happen.
And right now that sum isn't adding up to anything too impressive.
The charges are piling up, though, while companies go belly up. Many investors are locked into their stocks, bought at boom prices and now at 52-week lows. Others who could afford to get out, have. In little more than two weeks, trillions of dollars of financing have fled the blue-chip companies of the Dow. Foreign capital is leaving, too, as overseas investors look for safer places to put their money.
So far, Washington and even many knowledgeable observers have largely addressed the markets' crisis of confidence as if it were a relatively short-term problem: Pass the right laws, this way of thinking goes, and investors' faith will be restored. Eventually, the money will flow back in. But, up days aside, what if a generation's worth of damage has already been done? Put another way, if your grandparents lose their retirement savings in Enron or Global Crossing, how eager will you be to put your own nest egg in the market?
Meanwhile, no one knows what or how many corporate accounting scandals have yet to be uncovered, or how many earnings reports will need to be restated. The Securities and Exchange Commission has mandated that CEOs need to certify their companies' earnings by a mid-August deadline, so some market observers are now looking to that as a point where confidence and cash might start coming back in. One wonders, though, just how much of the Dow will erode if it's hit by a wave of scaled-down profit reports.
It will be interesting to come back in a year and see if, by then, 50 per cent of Americans still have investments in stock ... or if a mentality of "fool me once, shame on you; fool me twice, shame on me" prevails. Everyone who plays the capitalism game knows there are risks. But no one likes to find out that the house is fixed.
Dan Rather is a television news anchor. Copyright 2002 DJR Inc. Distributed by King Features Syndicate.
