Bush's task: Turn back the bears

But the White House could have avoided this juxtaposition relatively easily, say some critics. Keep Bush's Wall Street rhetoric confined to hours when the market is closed, for one thing. Make sure neither he nor his economic team talk about specific market levels.

The Clinton administration, for instance, would likely have turned to Treasury Secretary Robert Rubin under similar circumstances, says former Clinton official Martin Baily.

As a former Wall Street chieftain himself, Mr. Rubin knew just the kind of rhetoric markets like: vague and reassuring – not too specific.

"He would talk about the forces driving markets, the proneness of markets to go up and down, the underlying strength of fundamentals, things like that," says Mr. Baily.

Bush's Treasury Secretary Paul O'Neill, a blunt former Alcoa CEO, inspires little confidence by comparison, say many in Washington.

Bush "has been hamstrung by the fact that Treasury Secretary O'Neill is so weak," says Kevin Hassett of the American Enterprise Institute in Washington. "President Clinton would never have exposed himself to the kind of circumstances [Bush] suffered when he was talking about the market last week. Clinton would have sent Secretary Rubin out."

Still, it could be worse. Bush could be Ronald Reagan. The Great Communicator suffered both a stock dive and a recession early in his term in office.

Of course, Mr. Reagan recovered to win a smashing second term victory – and that's the point. In political terms, early troubles with the stock market don't tend to drag presidents down.

The S&P 500 fell by more than 23 percent in Richard Nixon's first 18 months in office, for instance, and he similarly won a big reelection victory. Today, people remember the Clinton years as a time of economic boom – or economic bubble – but in fact, stocks were only so-so his first year and a half.

Then there's the substance question: Will anything Bush has proposed actually work, in the sense of helping restore investor confidence?

After all, confidence is an ephemeral thing. As Federal Reserve Chairman Alan Greenspan said in congressional testimony last week, "You don't reverse investor ... confidence overnight."

Actions proposed by both Bush and Congress are unlikely to hurt the market, and could well help, say experts. And Washington is almost sure to see lots of legislative change, combining both Bush's "rotten apples" approach and a broader attack on perceived systemic abuses, which is laid out in the Senate version of the corporate-responsibility bill, now in a House-Senate conference.

But then again, the markets may correct themselves before legislative changes have a chance to take effect.

Firms that misled investors with funny numbers have been mercilessly handled by the markets – witness yesterday's bankruptcy filing by WorldCom. Over time, it is this discipline, and not longer prison terms for certain white-collar crimes, that may be the best defense against the Enrons of the future.

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