WASHINGTON – Amid much fanfare, President Bush signed a major corporate reform bill Tuesday at the White House.
"Today, I sign the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt," Bush said at a morning East Room ceremony. "With a tough new law, we will act against those who have shaken confidence in our markets, using the full authority of government to expose corruption, punish wrongdoers and defend the rights and interests of American workers and investors."
The bill, meant to restore investor confidence and crack down on corporate cheaters, sets up new regulations for corporate auditing practices and creates strict penalties for executives who hide debt in accounting tricks. It is the largest reform since changes were made to halt the Depression-era slide into bankruptcy.
Republican leaders are also hoping the bill will stem the loss of voters' trust in the administration's economic leadership.
The sweltering heat blanketing the Northeast moved the ceremony indoors, but did not stop a parade of leaders from attending. Cabinet secretaries, FBI boss Robert Mueller and Securities and Exchange Commission Chairman Harvey Pitt were at the event, as well as the bipartisan group of lawmakers who shepherded the bill through Congress with unusual alacrity.
Representatives of small investor groups were also on hand; the corporate CEOs subject to the new rules were not.
The signed bill that delineates these new regulations is a response to the accounting scandals at WorldCom, Enron, Tyco and other large companies which left thousands of employees without retirement savings and investors with valueless stock shares.
"This new law sends very clear messages that all concerned must heed. This law says to every dishonest corporate leader: 'You'll be exposed and punished. The era of low standards and false profits is over. No board room in America is above or beyond the law,'" Bush said.
Among other things, the bill creates an independent oversight board with subpoena power for the largely unregulated accounting industry. Executives will have to personally vouch for the accuracy of their companies' financial statements, with potential criminal penalties if they disguise losses.
The bill also imposes stiffer penalties for mail and wire fraud It does not, however, require corporations to list lucrative stock options given to top executives as compensation, a provision that many analysts believe is necessary but the administration opposes.
Legislation on pension reforms proposed by the president are still pending in the Senate after passing the House.
The Market Reacts
Stocks responded immediately to the corporate reform bill's passage by Congress last week and have been on an upsurge ever since.
The market climbed nearly 488 points on Wednesday. On Monday, the Dow Jones industrial average closed up 447.49 points.
This rally coincided with a rhetorical rampage from the Democrats, who on Monday accused the administration of not doing enough to revive the economy and of being too dismissive of corporate wrongdoing.
Republicans shot back that growth for the year is expected to top out at a manageable 3.5 percent, and that House GOPers led the president's call for corporate reforms in April, before the WorldCom scandal blew up.