Nearly three years since the Dow industrials peaked, and a year since the 2001 recession ended, the corporate sector and the legal system have only just begun to clean up the rubble left behind by the stock market bubble.
Last week, for example, was among the worst yet for chief executive officers, who are being shown the door in remarkable numbers on both sides of the Atlantic. The list of recent early retirees includes the heads of Dow Chemical, Bombardier, Monsanto, Allianz, Vodafone, Lloyds Bank, Cable & Wireless, Fiat, Bally Total Fitness, Computer Associates, Schering-Plough, Cingular Wireless and the parent of Caesars Palace. The common thread: the growing impatience of investors.
The pace of corporate bankruptcies -- the latest big one is Conseco -- has also not let up, each one bringing its own layoffs, empty office buildings and a fresh set of problems for lenders. The Bank of New York announced that it would take reserves and write-offs of more than $600 million to reflect problems with airplane leases held primarily by the now-bankrupt United Airlines. And Morgan Stanley allowed how it, too, had aircraft leases -- $4.8 billion worth -- on its balance sheet. Airline woes also led Boeing last week to pull the plug on development of a high-speed "sonic cruiser" for which United was the leading potential customer.
Meanwhile, it was only last week that bankrupt WorldCom got around to making a clean sweep of its board of directors, while Tyco International director Frank Walsh -- after being criminally charged -- agreed to return a secret $20 million "finder's fee" that had never been approved by Tyco's board. A federal court also cleared the way for Enron stockholders to sue Citigroup and J.P. Morgan Chase over their roles in the bankrupt energy firm's shenanigans -- a suit that could well give plaintiffs lawyers a chance to paw through the companies' e-mails.
The big news, of course, was that Citi, Morgan and eight other Wall Street firms agreed to pay $1.4 billion in fines and restitution to settle state and federal charges that their analysts hyped even lousy stocks during the bubble. The settlement will force firms to really mean it this time when they wall off analysts from investment bankers, and provide clients with independent research as well.
Surveying all this, Fed Chairman Alan Greenspan told a New York audience that the bubble's aftermath is taking longer to sort out than he and others first expected. He also allowed how he "would not be surprised" if more corporate scandals surface in the months ahead. Hmm.