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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (971)	6/30/2002 5:39:52 PM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Wall St. Seeks to Burnish Tarnished Image By Brian Kelleher Sunday June 30, 3:00 pm Eastern Time NEW YORK (Reuters) - Public speeches and novel advertising are all the rage on Wall Street, as corporate chicanery keeps popping up to rock financial markets. Wall Street executives are scrambling to clean up the industry's tarnished image amid accusations of crooked research and widespread investor mistrust in U.S. equity markets. WorldCom Inc.'s (Nasdaq:WCOM - News) admission on Tuesday it overstated results by $3.8 billion is the latest black eye to securities firms' credibility, whose highly paid analysts touted the telecom company even as its share price plunged to zero. Investors have had enough of Wall Street's overly bullish stock research and management shenanigans, as a recent U.S. Trust survey revealed 73 percent of wealthy individuals -- a prime target group for brokerage houses -- don't trust analyst recommendations. Some 76 percent of rich Americans -- those who earn at least $300,000 or have a minimum net worth of $3.75 million, question the reliability of financial statements. "Destruction of investor confidence, of this magnitude, hasn't occurred in roughly 70 years," said Ray Soifer, a former bank analyst who now runs his own consulting firm. "Many investors will stay out of the market and the consequent loss of trading volume will lead to reduced compensation and probably to further layoffs over time." WorldCom, a longtime Wall Street darling as its highly acquisitive strategy generated billions of dollars of advisory fees, is showing how the "experts" can drop the ball. In Enron's case, stock pickers advice was too little, too late. The same happened with the latest corporate blow-up. Longtime WorldCom cheerleader Jack Grubman of Salomon Smith Barney on Monday finally cut his rating on the shares to "underperform" from "neutral." By that point, the stock had fallen to around $1, from a peak of $64 in 1999. Bear Stearns suspended coverage on Wednesday and Robertson Stephens cut WorldCom to "market underperform" from "strong buy," saying: "We regret that we must make this call, when it is too late to help investors stem losses." WorldCom shares were still halted for trading on the Nasdaq and had plummeted all the way to 9 cents a share in pre-open trade on Instinet. MERRILL TOUTS STRAIGHT TALK Chief executives such as Merrill Lynch & Co. Inc.'s (NYSE:MER - News) David Komansky and Goldman Sachs Group Inc.'s (NYSE:GS - News) Henry Paulson have showed up in newspaper ads and at public speaking events to address credibility issues. Komansky, Paulson and New York Stock Exchange Chairman Richard Grasso have been identified as the most visible executives amid the investor crisis of confidence. "There has never been a more critical time for straight talk and commitment from the financial services industry," Komansky and Merrill President Stan O'Neal said in two-page newspaper advertisement on Wednesday. "We've heard the criticism," the executives said in the ad, which in a rare moved included their pictures. The ad does not mention that many changes in the firm's research policies were part of a $100 million settlement with New York state after the attorney general accused Merrill of misleading investors by tailoring overly bullish research to woo investment banking business. Companies and government must act decisively to restore investor confidence, Paulson said in a speech three weeks ago, becoming the first investment banking executive to publicly address the problems facing Corporate America. The NYSE, spearheaded by Grasso, has called for tougher standards for corporate management. "There has been some initial movement here," said Michael Holland, chairman of investment firm Holland & Co. and a Wall Street veteran for nearly 30 years. "But there needs to be a lot more." ANALYST INDEPENDENCE QUESTIONED New York State Attorney General Eliot Spitzer's probe into stock research has the industry shaking in its boots, and the Securities and Exchange Commission is also getting involved. Regulators and lawmakers want to find out if researchers are pressured by their investment banker colleagues to issue positive reports to placate potential banking clients. Securities firms are beginning to initiate measures to insure analyst independence, and have been vocal in their efforts. Spitzer uncovered a number of e-mails in which Merrill's Internet analysts privately bad-mouthed companies they publicly touted. The Merrill indiscretions took place during the halcyon dot-com days of early 2000. But some firms still haven't learned their lesson. The National Association of Securities Dealers on Tuesday fined U.S. Bancorp (NYSE:USB - News) investment banking unit Piper Jaffray $300,000 after the firm allegedly threatened a company with dropping analyst coverage of its stock if it wasn't named as an underwriter for a stock offering. Piper threatened the company in January, after the spotlight had already shone on the issue of analyst integrity. Wall Street is getting the message and working to restore confidence. The big investment houses don't really have a choice. "They have the most to gain and the most to lose," said Christopher Williams, CEO of privately held investment bank Williams Capital Group. "Their futures, and all of our futures, rely on credibility."