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To: Victor Lazlo who wrote (141055)	3/29/2002 2:42:18 AM
From: H James Morris	Respond to of 164684

>>Deutsche Bank originally voted 25 million shares against the deal, but switched 17 million at the last minute after HP threatened to take future business away.<< Deutsche Bank is a Wall Street slut. Every investor knows it! So is MWD, but by its chart you'd never know it.

To: Victor Lazlo who wrote (141055)	3/29/2002 10:29:29 AM
From: H James Morris	Read Replies (1) \| Respond to of 164684

>>March 29, 2002 In theory, free markets should be the ethics enforcer, punishing deceit and rewarding probity. The trouble with that theory is that quite often, markets aren't free; they are rigged. This week, Federal Reserve Chairman Alan Greenspan pontificated once again in favor of free-market solutions to ethical quandaries such as those presented by Enron, Andersen, Global Crossing and the like. Greenspan said that the stock market is already punishing companies whose accounting is suspect. That's true in a few cases, but it is not apparent that corporate reporting practices have improved greatly. A new reporting period begins soon; it may tell us much. Market forces are better equipped to make sense of economic mares nests than are regulators, quoth Greenspan. Generally, that argument is true. That's why deregulation has worked very well in some areas of the economy, such as trucking, and worked reasonably well in other areas, such as airlines and telecommunications. But even some of the most avid University of Chicago/libertarian-leaning economists would agree that one sector that should not be a candidate for deregulation is Wall Street. Others would also exclude related financial sectors, such as banks. For years, I have been proselytizing for free markets (often getting egg on my face), but I have never favored deregulation of the securities industry. There is only one variable: greed. There is only one measure of success: money. Self-regulation on Wall Street is out of the question. That's why the National Association of Securities Dealers, a nonprofit organization, works closely with the Securities and Exchange Commission, a government regulatory body. Unfortunately, both need more teeth, bigger staffs and more money. The most crying need is for carefully crafted laws that tell executives that if they cross certain lines, they go to the pokey. Prison sentences don't deter crime in the streets, but they do deter crime in the suites. Today, a major corporate executive charged with a crime can afford to hire a team of high-priced attorneys who can exploit the gray areas of the law. There are gaping gray areas because the people who write the laws – politicians – provide safe havens to their benefactors. Financial crime is based on contrived complexity: Byzantine corporate structures, sheltered by libertine accounting principles and wrapped up in indecipherable legal prose. To the maximum extent, bad news is dropped in black holes offshore. The SEC knows it, the IRS knows it, state securities regulators know it. But Congress protects it; members of Congress get their succor from the malefactors. The most pious-sounding preachers for free markets were the top executives of Enron, who only understood rigged markets. They also understood the importance of lining politicians' pockets. The accounting industry says it will change its stripes by separating its auditing and consulting functions. Not enough. It must remember an original precept – that it exists to serve the public, not just its clients. Wall Street firms say they will separate their security analysts from the investment banking side: From now on, analysts will honestly size up a company for the good of the firms' customers, not publish puffery to try to drum up more business for the firms' underwriters. Too late. Wall Street flunked its self-control tests during the 1990s, particularly in the period when initial public offerings were zooming 70 percent, on average, the first day – prima facie evidence of fraud. At the SEC's behest, securities lawyers say they are trying to write more clearly. Not enough. They have to be held legally accountable for obfuscating swindles. There are hosts of conflicts of interest among Wall Street firms, accounting firms, bond-rating agencies, banks, American corporations. It would be wonderful if a free market could sort out those conflicts. History says it can't. Greenspan knows that. But he has a conflict. His employer, the Federal Reserve, is owned by banks. uniontrib.com