Scandals and Poor Management Have Led to Lack of Trust in Market

Right now the stock market and the economy have a multitude of problems. One could go on and on listing everything humanly possible for reasons as to why the economy is sliding deeper into a severe recession. Similarly, any investor could list dozens of reasons why the stock market has performed horribly since late 2007, losing more than 50% in many cases. One factor that is critically important that is sometimes overlooked is the lack of trust in the system as a whole by the American people and investors in the market.

In the past few years the stock market has had numerous scandals break. First it was the scandals of Enron, WorldCom, and Tyco where the books were cooked and two of the three companies went to zero in no time. Thousands of Americans lost their savings in those scandals, which obviously makes them wonder about the validity of corporate accounting and the system. Lately there have been several hedge funds go belly up and the managers of those hedge funds go on the run. Most recently the "Ponzi scheme" of Bernie Madoff has hit several thousand clients, including some very high profile ones such as Larry King and Sandy Koufax.

If the scandals weren't enough how about the lack of corporate management at many of our nation's biggest firms? This is especially the case in the financial industry where management decided to throw caution to the wind and leverage itself to absurd levels. Bear Stearns, Merrill Lynch, WaMu, Bank of America, and many other financial institutions are guilty of this kind of management. The greed of these corporate managers is also very frustrating to the average investor. While they were making hundreds of millions of dollars their company was in the process of going bankrupt and thousands of Americans were losing their hard earned savings.

It's not just corporate management, but also government's management of economic programs that has let us down. The TARP program was probably a necessary evil, but there here has still been no accountability or specific details as to how it is working. The current system of bailing out companies and not knowing exactly what those companies are doing with the money is very tough to take for those Americans who are losing their jobs and their savings. The government and treasury must be more forceful about regulating the markets in an efficient way, without overstepping its boundaries.

The bottom line is Americans and investors as whole don't trust the stock market right now, and how can you blame them? So many things have happened that make people think that this is a rigged game. The stock market is a great and powerful tool to make money, but it is time for top officials to step up and restore the trust in the financial system.