<

The Fall Guy
Wednesday, September 11, 2002
By Daniel Gross
Slate Magazine

Daniel Gross writes Slate’s “Moneybox” column

Blame Bernie, not bin Laden, for the excruciatingly painful bear market.
Image Credit: Kenneth Lambert -- AP.

While the Dow plunged 14 percent in the weeks after the attack, it recovered quickly. By Oct. 16, the S&P 500 had reached its Sept. 10 level, and the indexes powered higher in early 2002. In every month between October 2001 and May 2002, investors put more cash into the market than they took out. Net inflows into U.S. stock mutual funds were a robust $14.9 billion in November, $19.6 billion in January 2002, and $29.3 billion in March 2002.



But it all came to an end in this summer.



One year after Sept. 11, it’s clear that investors have suffered immense losses because of the actions of a wicked, bearded foreigner. This outwardly pious but inwardly corrupt evildoer, who has shattered the hopes and dreams of thousands of Americans, has become a recluse, fearing to venture out in public and targeted by federal authorities.

Of course, Bernard Ebbers, the Canada-born former CEO of WorldCom, hasn’t committed mass murder. He hasn’t even been charged with a crime -- yet. And like Osama bin Laden, he certainly wasn’t alone in wreaking havoc. But his actions, and those of his deputies at the company he created and ran, may have been the straw that broke the back of a market whose post-9/11 resilience was both remarkable and unanticipated.

When the Twin Towers fell, pundits worried that the market would collapse with them. But while 9/11 certainly hammered some sectors -- airlines and hotels, to name two -- it didn’t cause lasting damage to the economy or to investor psychology. By contrast, the series of faith-draining corporate scandals that culminated with the July 21 bankruptcy filing of WorldCom may have finally accomplished what the dot-com bust, the fiber-optic meltdown, bin Laden, and even Enron couldn’t: It persuaded investors to abandon stocks.

* A QUICK RECOVERY
* SCANDALS GALORE
* INVESTOR SKEPTICISM
* THE FUTURE AND THE PAST
(More: MSNBC.com News Source)
2002 © Slate Magazine.

Dan