Don't sell, pleads Wall Street boss

In an interview that bordered on emotional, Mr Grasso pleaded with investors: ``Please be patient. Please don't do something that emotionally feels good but in the long term will be a mistake."

Mr Grasso was speaking to NBC's Meet the Press on the eve of Monday's trade in the US, and after a week in which the Dow Jones Industrial index plunged by more than 600 points.

``We've got to wage a war against terrorism in the boardroom," Mr Grasso said.

``Those who have broken the law, those who have in essence misused the public's trust, have got to go to jail."

Many analysts are now saying that the collapsing stockmarket threatens the fragile recovery of the US economy, despite low interest rates, low inflation and steady growth in GDP.

If the US market continues to fall at the current rate, 2002 will be its worst year since the recession of the 1970s.

More than $US7 trillion ($12.6 trillion) in value has been wiped off stock prices in the past two years, making it difficult for companies to raise the money they need to invest.

With business spending dormant, the US economy has relied on consumers to keep the country out of recession.

Analysts fear that the sagging stockmarket will frighten them into snapping their wallets shut especially if, as many warn, more scandals are on the way.

``Investor confidence has been tested by the failure of a number of companies to be truthful and honest," Mr Grasso said, with some understatement.

He said companies needed to win back ``public trust and confidence. Investors need to believe that their money is being managed with high ethics."

Despite the tough talk, the New York Stock Exchange has hardly been aggressive about forcing change. Its plan to deal with corporate malfeasance is widely considered the weakest of several on the drawing board.

Grasso's plea came as WorldCom finally yielded to the inevitable and filed for bankruptcy, the largest in history. The company last month admitted it had overstated its earnings by a lazy $US3.8 billion and that it had $US30 billion debts.

WorldCom, which owns Australia's OzEmail, intends to keep serving its 20 million customers, but large slabs of the business will have to be sold off. Some analysts suggest it will not survive in any form.

In one of the classic business quotes of the year, the company's new CEO, John Sidgmore, said: ``The shame of it all is that underlying the debt and the restatement and the alleged fraud is a really great company."

WorldCom was worth $US120 billion at its peak. Now, the former chairman, Bernie Ebbers, owes the company twice what it is worth. He is being investigated for fraud.

In Washington, the House of Representatives and the Senate remained at odds over new laws to deal with corporate malfeasance, but congressional staffers met on Sunday to try to find a compromise.

A two-hour meeting ending without an official announcement. President Bush rapped Congress in his Saturday morning radio speech for failing to present him with a bill to sign.

The Senate's bill, sponsored by Democrat Paul Sarbanes, is widely considered the tougher of the two.

It doubles the penalty for mail and wire fraud (these charges are often used in cases of white-collar crime) from five to 10 years.

In its original form, the House bill contained few penalties, but members scrambled to correct that after last week's selling frenzy on Wall Street. Its penalties are now twice as severe as those in the Senate bill.