Bush “Stern Legal Action against Executives of Illegal Act”

▽Criticism of Bush’s Speech 〓 "I`ll strengthen enforcement powers of S.E.C., and will call for a corporate responsibility increasing more budget", the President Bush said through unscheduled news conference on July 8 before emphasizing a corporate reform visiting the Wall Street of News York on July 9. Mr. Bush expressed confidence in Harvey L. Pitt, the chairman of the SEC, whose resignation has been called for by Democratic Congressional leaders for reasons of the incompetence for reformation, saying “I will give an opportunity of the corporate reform to him”.

According to the LA Times as of July 9, the political authority has called for the resignation pressure, but Mr. Bush doesn’t accept it”. Also, the News York Times said “the curious timing of his news conference appeared intended to distract attention from a day that would have been dominated by news coverage for beleaguered WorldCom executives. The event also seemed an attempt to place Mr. Bush back in command at the White House after three days of television and newspaper pictures of him fishing and golfing in Maine, many of them accompanied by reports of the president`s own corporate stock dealings.

▽Doubt about the accounting irregularity of Merck and Company 〓 “Merck and Company which is a pharmaceutical company of the third place in the world, increased the sales by registering the co-payment of USD 12.4 billion for prescription (revenue of Medco, the affiliated company) of three years into the accounting book of Merck”, Wall Street Journal reported on July 8. It is equivalent to 10% of total sales of Merck. Merck said “Its filings were in accordance with generally accepted accounting practices, and accounting firm already approved it. The difference of accounting method had no impact on Merck`s new income and earning rate per share".

As many companies after Enron and WorldCom has been questioned, the Wall Street has been shocked by ‘Trust breakdown’ again. The concerned person of Wall Street said, “if SEC doesn’t clear the suspicion of the accounting irregularity sufficiently, SEC could be the subject of a reform, not a main body of the corporate reform.

▽Public hearing of World Cup 〓 There was the public hearing of the Lower House for the former and present executives of WorldCom which has the accounting irregularity of USD 3,850 million on July 8. However, Bernard Ebbers, the former CEO and Scott Sullivan, the former CFO turned down its testimony.

Mel Dick, a former partner of Arthur Andersen which is the accounting & auditing firm of WorldCom, and Jack Grubman, an analyst of Salomon Smith Barney which suggested the purchase of WorldCom’s securities insisted “We never knew the accounting irregularity of WorldCom”.

▽Decrease of Stock Price 〓 Due to doubts about Merck & Company and continuous bearish trend of US dollar, the New York stock market showed a declining tendency on July 8. Nasdaq Composite was off to 1,405.61P decreased by 2.95%(42.75P), the Dow Jones industrial average (DJIA) was off to 9,274.90 decreased by 1.12%(104.60P). Also, S&P500 INDEX was 976.98P decreased by 1.22%(12.05P). The stock price of Merck decreased by 2.15%. For technology, securities for semiconductor and software decreased. Among them, Intel slumped by 5.32%.

konihong@donga.com