Our AWOL President

President Bush spoke and the market swooned--again--when he declared Monday that the economy was fundamentally sound and only suffering from a “hangover” of the 1990s. Such cheerleading, it is obvious, does nothing to end the market’s crisis of confidence. Only by embracing fundamental regulatory reforms can Bush reassure the public and investors.

With a vacuum at the White House, others are scrambling to lead. Overwhelming Senate passage of Sen. Paul S. Sarbanes’ accounting reform bill and Coca-Cola Co.’s announcement that it will count stock options as expenses are welcome--but not sufficient. The president cannot remain AWOL, either from efforts to deal with his administration’s ethical taints or from crafting specific reforms.

Unfortunately, Bush still does not seem to grasp the extent to which his own administration has come under an ethical cloud. He should authorize the Securities and Exchange Commission to release any documents connected to his 1990 sale of stock in an energy company of which he was a board member. The sale occurred shortly before bad news about the company was made public.

Bush also needs to clean house: He should dismiss both SEC Chairman Harvey Pitt, whose close ties to the accounting industry have forced him to recuse himself from dozens of cases, and Secretary of the Army Thomas White, a former energy-trading executive at Enron.

Now that the Senate has passed accounting reform, Bush can help ensure that restive House Republicans support its chief aims: an independent auditing board and a crackdown on accounting firms that also do strategic consulting for the companies they audit. He could at least endorse the idea that corporations should declare as an expense the value of stock options they grant to employees. Coca-Cola alone can’t drag the rest of corporate America down the road of honest bookkeeping.

Top finance officials in California, New York and North Carolina, who together control more than $200 billion in taxpayer funds and public pension money, have joined to force investment banking firms and brokerage houses doing business with them to eliminate the conflict posed by touting stocks in which the brokerages have an interest. However laudable that is, only federal regulations can ensure uniform and reliable standards.

The president who found a confident voice and claimed leadership after 9/11 is floundering. The more that Bush hails the economy, the more the public will see him as failing to take fundamental problems seriously. The economy may be suffering from a hangover, but the president isn’t taking away the punch bowl.