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Greenspan for Dummies 

One of the great entertainments in our nation's capitol is listening to testimony by Federal Reserve Board Chairman Alan Greenspan. Amid great soaring flights of erudition he somehow always manages to ground himself long enough to rattle off some homespun wisdom.

Recently, for example, he told Congress that firms whose value stems mainly from concept rather than from physical assets are inherently fragile. What insight -- that we would all benefit if the nation's businesses had something more going for them than half-baked ideas.

And, earlier this year, in testimony to the U.S. Senate Banking Committee that was largely couched in economic jargon, Greenspan again managed to lapse into the folksy, suggesting that baseball is the real key to understanding an ever more complex investment playing field.

The Chairman suggested that a proper grasp of baseball statistics -- numeric concepts that taught him basic arithmetic when he was younger and were the basis for his legendary statistical acumen -- were the key to financial literacy.

I can't help but think of this presentation on financial literacy as the Chairman's "you consumers are a bunch of dummies" speech.

"Education," he continued, "can help provide individuals with the financial knowledge necessary to create household budgets, initiate savings plans, manage debt, and make strategic investment decisions for their retirement or their children's education."

But really it matters little how financially literate the investor is when our markets are so rife with crooks.

Certainly I have a somewhat jaundiced view of the markets, one honed through too many years answering investor hotline telephone calls as an employee of the Commodity Futures Trading Commission. The calls were always pleas from frantic people who had been defrauded, and often from those who had lost their life savings. Most involved firms operating on the legal fringes -- "boiler rooms" in many cases. Today's rollcall of suspect firms, on the other hand, includes a who's who of our financial industry, and that doesn't seem to bother Greenspan.

When the tech bubble deflated over several months in 2000, few analysts encouraged stockholders to sell off stocks that were rapidly losing value. And some analysts who did suggest that course of action were fired, according to widespread news reports. In all, some $4 trillion in wealth evaporated, the Nasdaq lost 60 percent of its value, the Standard & Poor's index tanked, and the Dow dropped below 10,000.

Then there was Enron. In late 2001 the energy company went from owning almost everything to owning almost nothing, practically overnight. Thousands lost their jobs. Millions were left holding worthless stock, or holding the bag for debts run up by the energy company. It seems the impending collapse was no secret to high-level Enron execs, or to the company's auditors at Arthur Andersen.

It's somewhat unfair, though, to single out Arthur Andersen. In the wake of Enron, most of the accounting industry has proven it doesn't know its ass from an abacus as the accounting practices of firm after firm have been called into question.

In early April, New York attorney general Eliot Spitzer announced a probe of Wall Street that included stock analysts at most of the major companies. Not to be outdone, the nation's top securities regulator, the Securities and Exchange Commission, finally mindful of the stench, joined forces with Spitzer.

Now WorldCom, a publicly traded telecom giant, is on the verge of going belly up. Should the company crash, tens of thousands of mom-and-pop shareholders will take a hit. Still, former CEO Bernard Ebbers, the man who brought WorldCom to the brink of disaster, is doing just fine: The company has given him an interest-free $366 million loan.

None of these scandals has drawn more than glancing criticism from Greenspan. Instead he's happy to paint consumers as financial ignoramuses and call for more investor education.

Perhaps, though, he should re-examine his cute little baseball analogy. The current level of financial deceit can only bring to mind the most famous baseball swindle, the 1919 World Series between the Chicago Black Sox and Cincinnati Reds. The Sox threw the series, losing on purpose to a lesser team. When the truth came out, eight players were banned from baseball for life.

It was felt that the athletes -- like so many white-collar swindlers today -- had broken the public's trust.

Freelance writer James A. Thompson is a former Wall Street Journal staffer and employee of the federal Commodities Futures Trading Commission.

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