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Can you believe it? Wall $treet Week with FORTUNE is celebrating its first anniversary -- and what an inaugural year it was.
With the market going through its third bearish year of a bear, skeptics thought maybe it wasn't a good time to be a business reporter. Individuals were disgusted with corporate America and were supposedly tuning out of investment news in droves. Nothing could have been further from the truth.
The same week our program launched, the Securities and Exchange Commission charged WorldCom (which has since returned to its old name, MCI) with massive fraud. Rite Aid joined the lineup, as did Tyco chief Dennis Kozlowski. Xerox was charged with improper accounting practices, while Adelphia filed for bankruptcy and Martha Stewart's broker was suspended from Merrill Lynch. Then Qwest joined the rogues' gallery of companies with seemingly-impressive earnings gains and no real revenue growth, and introduced us to the infamous Jack Grubman and the seamy side of investment banking relationships.
Those corporate malfeasance headlines finally caught the attention of Washington, D.C., convincing Congress and President George W. Bush to propose changes to guard against the "infectious greed" described by Fed Chairman Alan Greenspan. The Sarbanes-Oxley Act of 2002 was enacted to "protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes."
The heat was on for CEOs who pled ignorance to the day-to-day operations of their companies, although SEC regulators put a stop to that with its mid-August deadline forcing CEOs to certify their company's financial statements.
And investigators' spotlight widened to include boards of directors which, in many cases, were just rubber-stamping whatever management said or did. Placed under the investor's microscope were management compensation packages, some of which were so egregious that they tarnished the once-golden reputations of some of the nation's most revered leaders, such as Jack Welch.
When it appeared that regulators dropped the ball on financial firms, a brash and ambitious attorney general from New York, Eliot Spitzer, filed a $1.5 billion suit against five telecom concerns over the practice of "spinning" shares of initial public offerings, awarding them to top executives in return for their business (and very lucrative consulting fees).
This was pretty much the darkest time before the dawn, as major market averages fell to their lowest levels while investors bailed out of what many saw as a rigged game. The smell from corporate America was now becoming a stench, with Enron admitting its role in scamming Californians into paying exorbitant energy costs, and Citigroup's name was sullied as it's tentacles of credit lines strangled truth, justice and the American way. Enter Sallie Krawchek, named chair and CEO of Citigroup's Smith Barney unit after her stint as the boss of the well-regarded independent research firm, Sanford Bernstein.
When Republicans gained control of Congress in November, they also took charge of the government's economic policy. They could no longer blame Democrats of being obstructionists, and found themselves saddled with responsibility for the state of the economy and investor confidence. And as the new leaders of Congress celebrated their election win, Harvey Pitt thought his resignation as chair of the SEC would slip by unnoticed. Instead, it started a floodgate of exits from the Administration's economic team including, among others, Treasury Secretary Paul O'Neill, and advisor Lawrence Lindsey and the newly named head of the Accounting Oversight Board, William Webster.
The start of 2003 brought us tensions with North Korea, civil unrest in Venezuela
and closer to war with Iraq. Crude oil prices surged along with gold, a traditional safe haven in times of unrest, while the dollar started its global descent. Against that backdrop, ther president proposed the elimination of taxes on corporate dividends, prompting Microsoft to announce its first-ever dividend. Stocks that pay dividends suddenly became the prettiest girls at the ball, as proponents of this tax treatment viewed it as a panacea for all that ailed the market and economy.
The Bush administration also assembled a new economic team, with John Snow easily confirmed as the new Treasury Secretary. William Donaldson faced a more difficult confirmation as head of the SEC, as some critics viewed blemishes in his personal life as threats to the squeaky clean image needed to lead the agency in charge of protecting the individual investor.
While individual investors may have been burned by the stock market, the housing market was on fire, thanks to record low interest rates. The ability of home owners to re-finance their mortgage and cash out offset the complications of dwindling nest eggs and disappearing jobs. The stock market slump and uncertainty over what to do about Iraq ended when American and British troops began and quickly concluded its initial military operations. And with almost as much speed, Congress passed a watered-down version of Bush's original proposal and created $350 billion dollar tax cut, with cuts in taxes on dividends and capital gains.
Now the market is nearing the end of the second quarter and at a critical juncture. Will these tax and regulatory reforms do anything for corporate America, its shareholders and the economy? Or will it be business as usual and back to a bear market? Whatever the answer, we certainly know what got us to this point. Let's hope the worst is behind us.
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