Republicans, corruption and the stock market

[Larry Williams]

No, I'm not saying the current problems with the stock market are all Bush's fault. In fact, he was one of the beneficiaries of earlier political payola and corruption.

Remember the Republican "Contract on America?" Well they made lots of noise about a lot of issues and most were aimed at one issue voters. They promised those one issue voters action on things like abortion, pushing religion in schools and elimination of gun control. Nothing happened there because the Republicans can't afford to loose those issues and maybe those votes. Wheels did turn in Congress but they were the ones that were well greased with money.

One of the first things they passed was the Private Securities Litigation Reform Act of 1995. It made corporations, executives and accounting firms immune from most lawsuits for fraud involving how they represented the true financial state of those corporations. It opened the door to the mess we have on Wall Street today. Corporate executives and their auditors were no longer accountable for theft by deception and lying. Their victims have their remedies severely limited so what ever those executives can steal is theirs to keep.

President Clinton vetoed the Bill but was overridden by Newt and Company waving their flags and touting their "Contract on America." Now it's come home to roost. Aren't you impressed by the good it's done? You can see Clinton's veto message to the House of Representatives at http://www.lectlaw.com/files/leg22.htm . Today it sounds almost prophetic.

After Enron, there was suddenly pressure to pass campaign finance reform. It passed and was signed into law. Now Bush's Federal Election Commission is quietly gutting the law and removing the few teeth it had.

The stereotype is proving to be true. The Republicans are watching out for the rich while stealing the retirement investments and savings of the middle class. What do you think our fine Senator who's up for re-election has to say about it all? I sure don't know--he doesn't answer my e-mail with anything but an automated response that says nothing.

[This message has been edited by Larry Williams (edited 07-04-2002).]

[cheeto]

Of course the speculative rise of bogus dot.com companies in the 90's who produced no tangible products didn't alert you at all that a Big problem was looming on the horizon????Our manufacturing base never was considered in the Clinton economy as jobs left the states by the tens of thousands.Know where you can find a good living wage with benefits that are WORTH having?Don't single out any single party for the problems now.Don't you think social security could be fixed in 20 minutes by the POLITICIANS OF BOTH PARTIES if they had to live on the benefits it pays,no wonder Hillary wanted to be a senator,she keeps her wage for the REST OF HER LIFE!!!Listening to locals complain about the present political problems is like listening to the complaints of the locals regarding the Berryville sewage spill,you can't solve your own political MESS and you can't stop polluting your own backyard!

[just wondering]

Don't worry Larry, are we not one nation "under god"? The real fun starts when the Fed has to raise the interest rate to keep the US Dollar from falling and going to zero in value. Today, we got a first shipment of Russian oil payable in dollars. The Arabs are now pushing for their oil payments in Euros. We live in interesting times.

[cheeto]

The real fun starts when you run out of room for your "FOR SALE" signs that are SO obvious here.

[Larry Williams]

Cheeto,

A large part of the reason for the stock market crash of 1929 was the lack of accounting standards for publicly held corporations. There was no way to tell anything firm about a company's solvency.

Congress created the Securities Exchange Commission to oversee this and established standards for companies to follow with the Securities Act of 1933 and the Securities Exchange Act of 1934. This created accounting and reporting standards and established penalties and accountability for corporate executives and accountants.

Newt Gingrich and his pals decided to change that and offered the Private Securities Litigation Reform Act of 1995. This act forces law suits into Federal Court where just getting on the docket takes five to six years. It also limits the liability of corporate executives and accountants who might be involved in fraudulently representing a company's financial solvency.

President Clinton vetoed the law but it was overridden by Gingrich and his Republican majority in the House. I've added the text of Clinton's veto notification to the House below.

It's not uncommon for emerging technology to have a boom and bust period on Wall Street. The dot-coms were no exception. But they're only a small part of the 1.3 trillion dollars privately held portfolios have lost in the last few years. Previously solid companies are falling like flies because of fraudulent accounting reporting. These include companies like Xerox, AT&T, Quest, Enron and Peregrine to name a few. The average conservative investor's stock portfolio is worth just slightly more than 50% of what it was a couple years ago. Hillary Clinton, sewage spills nor even Eureka's political climate don't have a stinking thing to do with this.

The main reason for the stock market problems which have effected nearly every person in America is the Private Securities Litigation Reform Act of 1995. I don't care what you think or say the fact is that this act is the responsibility of Newt Gingrich, the Republican Majority in the House of Representatives and the Contract on America. This act was a license for accountants, CEO's, CFO's and corporate boards to steal by deception and fraud. Investors no longer have any confidence in earnings and financial statements because of this Act and we can expect more problems in the future.

Here's the text President Clinton's veto notice to the House:

THE WHITE HOUSE
December 20, 1995

TO THE HOUSE OF REPRESENTATIVES:

I am returning herewith without my approval H.R. 1058, the "Private
Securities Litigation Reform Act of 1995." This legislation is designed
to reform portions of the Federal securities laws to end frivolous
lawsuits and to ensure that investors receive the best possible
information by reducing the litigation risk to companies that make
forward-looking statements.

I support those goals. Indeed, I made clear my willingness to support
the bill passed by the Senate with appropriate "safe harbor" language,
even though it did not include certain provisions that I favor -- such
as enhanced provisions with respect to joint and several liability,
aider and abettor liability, and statute of limitations.

I am not, however, willing to sign legislation that will have the effect
of closing the courthouse door on investors who have legitimate claims.
Those who are the victims of fraud should have recourse in our courts.
Unfortunately, changes made in this bill during conference could well
prevent that.

This country is blessed by strong and vibrant markets and I believe that
they function best when corporations can raise capital by providing
investors with their best good-faith assessment of future prospects,
without fear of costly, unwarranted litigation. But I also know that
our markets are as strong and effective as they are because they operate
-- and are seen to operate -- with integrity. I believe that this bill,
as modified in conference, could erode this crucial basis of our
markets' strength.

Specifically, I object to the following elements of this bill. First, I
believe that the pleading requirements of the Conference Report with
regard to a defendant's state of mind impose an unacceptable procedural
hurdle to meritorious claims being heard in Federal courts. I am
prepared to support the high pleading standard of the U.S. Court of
Appeals for the Second Circuit -- the highest pleading standard of any
Federal circuit court. But the conferees make crystal clear in the
Statement of Managers their intent to raise the standard even beyond
that level. I am not prepared to accept that.

The conferees deleted an amendment offered by Senator Specter and
adopted by the Senate that specifically incorporated Second Circuit case
law with respect to pleading a claim of fraud. Then they specifically
indicated that they were not adopting Second Circuit case law but
instead intended to "strengthen" the existing pleading requirements of
the Second Circuit. All this shows that the conferees meant to erect a
higher barrier to bringing suit than any now existing -- one so high
that even the most aggrieved investors with the most painful losses may
get tossed out of court before they have a chance to prove their case.

Second, while I support the language of the Conference Report providing
a "safe harbor" for companies that include meaningful cautionary
statements in their projections of earnings, the Statement of Managers -
- which will be used by courts as a guide to the intent of the Congress
with regard to the meaning of the bill -- attempts to weaken the
cautionary language that the bill itself requires. Once again, the end
result may be that investors find their legitimate claims unfairly
dismissed.

Third, the Conference Report's Rule 11 provision lacks balance, treating
plaintiffs more harshly than defendants in a manner that comes too close
to the "loser pays" standard I oppose.

I want to sign a good bill and I am prepared to do exactly that if the
Congress will make the following changes to thislegislation: first,
adopt the Second Circuit pleading standards and reinsert the Specter
amendment into the bill. I will support a bill that submits all
plaintiffs to the tough pleading standards of the Second Circuit, but I
am not prepared to go beyond that. Second, remove the language in the
Statement of Managers that waters down the nature of the cautionary
language that must be included to make the safe harbor safe. Third,
restore the Rule 11 language to that of the Senate bill.

While it is true that innocent companies are hurt by frivolous lawsuits
and that valuable information may be withheld from investors when
companies fear the risk of such suits, it is also true that there are
innocent investors who are defrauded and who are able to recover their
losses only because they can go to court. It is appropriate to change
the law to ensure that companies can make reasonable statements and
future projections without getting sued every time earnings turn out to
be lower than expected or stock prices drop. But it is not appropriate
to erect procedural barriers that will keep wrongly injured persons from
having their day in court.

I ask the Congress to send me a bill promptly that will put an end to
litigation abuses while still protecting the legitimate rights of
ordinary investors. I will sign such a bill as soon as it reaches my
desk.

WILLIAM J. CLINTON
THE WHITE HOUSE, December 19, 1995.

[This message has been edited by Larry Williams (edited 07-06-2002).]