NEW YORK (CNN/Money) -
President Bush expressed confidence in the fundamental strength of the U.S. economy Monday, even as the U.S. dollar fell to parity with the euro and U.S. stock markets -- despite the President's words -- continued to give back the gains of the late 1990s.
"Our economy is fundamentally strong. This economy has the foundation for growth so that people who want to find work can find work, so entrepreneurs can flourish," Bush said in a speech at the University of Alabama at Birmingham.
Bush named what he saw as the economy's strengths, including low inflation, low interest rates, increasing productivity, a recovering manufacturing sector and resilient retail sales.
"In spite of the fact that we have been in a slump for a while, and in spite of the fact that terrorists attacked us and affected our economic outlook, American businesses and workers are resilient and resolved, and this economy is coming back," Bush said.
And the Financial Times reported Monday that Bush's chief economic adviser, Lawrence Lindsey, said recent data did not indicate that another recession is around the bend.
"We have rising real incomes for households, leading to rising real consumption. That looks unlikely to be disrupted," Lindsey reportedly said.
But many analysts believe that the recent misery of U.S. markets and the dollar is driven more by concerns about the reliability of corporate accounting than fear of economic fundamentals -- a topic Bush addressed again Monday.
He stopped short of supporting a bill, introduced by Sen. Paul Sarbanes (D-Md.), to reform corporate accounting and governance, a bill on which the Senate is expected to vote Monday afternoon. He did urge the Senate and the House to quickly reconcile the differences between Sarbanes' bill and the bill passed in April by the House of Representatives.
"I'm willing to work with Congress to make sure we have the necessary law in place to hold people accountable without stifling the entrepreneurial spirit of America," Bush said.
Bush made a speech last week addressing the recent scandals in corporate America, from Enron Corp. to WorldCom Group, laying out some reform proposals.
Wall Street unimpressed
But his speech last week did little to cheer investor sentiment -- the Nasdaq and Standard & Poor's 500 stock indexes finished the week below the lows they reached after the Sept. 11 terrorist attacks, and the Dow Jones industrial average fell toward its September low.
|Bush's speech last week did little for markets.
The stock selloff continued before, during and after Bush's speech Monday, indicating it will take more than a speech or two to calm investors' nerves. Stocks recovered at the end of the day, however, with the Nasdaq turning positive and the Dow only slightly down.
"What people have to see are actions being taken. Words are part of it, and setting the tone and speaking out are part of it," said John Davidson, president and CEO of PartnerRe Asset Management Corp. "But people need to see that the judicial branch goes after people who have done wrong and will able to punish them, and that the legislative branch makes changes in the laws, if deemed necessary."
Democrats also have said Bush's credibility has been hurt by his own past business dealings with Harken Energy Corp., an investigation by federal regulators of accounting practices at Halliburton Co. during Vice President Dick Cheney's tenure as CEO and the alleged conflicts of interest of Securities and Exchange Commission Chairman Harvey Pitt.
This weekend, Pitt again rejected calls by Democrats and Sen. John McCain (R-Ariz.) that he step down, in part because of his past employment by the accounting industry, ties that have led him to recuse himself from a number of SEC decisions. He also rejected calls for Bush to release documents related to his activities with Harken.
"Unless there's a reason to re-open ancient history, we should move on," Pitt reportedly told NBC's "Meet the Press" program.
Bush has said the SEC investigated his activities in 1990, when his father was president, and found no wrongdoing on his part. He has accused Democrats of trying to make political hay of old news in a congressional election year.
While questions about his past business dealings may not resonate with voters, a weakening economy almost certainly will. Bush likely remembers his father's loss in the 1992 election, driven mainly by a sluggish recovery from the 1990-91 recession.
While the impact of the corporate scandals has so far been mostly compartmentalized from the broad economy, some economists have begun to wonder how long that will last. On Monday, the Bond Market Association said its semi-annual survey of economists found the crisis in confidence to be a growing concern.
"Most of the committee members believe continuing accounting and corporate governance issues are eroding investor confidence and keeping stock prices low," the BMA said in a press release. "This in turn is dampening growth through a reverse 'wealth effect,' reduced consumer spending due to depressed asset prices and by increasing capital costs for businesses that want to invest."
Investors likely will pay close attention Tuesday to Federal Reserve Chairman Alan Greenspan, who is scheduled to appear before the Senate Banking, Housing, and Urban Affairs Committee to deliver his semi-annual report on monetary policy.
The Fed carefully avoided the topic of corporate scandals when it decided in late June to leave its target for a key short-term interest rate at a 40-year low. But Greenspan likely will be questioned about the topic by senators Tuesday.