Greenspan urges restoration of trust to protect U.S. financial markets

Friday, April 16th 2004, 12:00 am

By: News On 6

WASHINGTON (AP) _ In light of the corporate scandals of recent years, companies need to work harder than ever to restore trust in the operation of the nation's financial markets, Federal Reserve Chairman Alan Greenspan said Friday.

Greenspan predicted that such trust can be restored, but he warned of serious consequences if it is not.

``Recent allegations of Wall Street of breaches of trust or even legality, if true, could begin to undermine the very basis on which the world's greatest financial markets thrive,'' he said in remarks to a financial conference sponsored by the Federal Reserve Bank of Atlanta.

Greenspan said that Americans had lost sight of the need for trust in their business dealings because of a false sense of security that laws and government agencies would protect them in their financial dealings.

``Corporate scandals of recent years have clearly shown that the plethora of laws of the past century have not eliminated the less savory side of human behavior,'' Greenspan said in remarks delivered by satellite to the conference at Sea Island, Ga.

Greenspan predicted that the market place will now push businesses, in light of the scandals, to strive harder to show honesty and integrity in their dealings with customers.

And Greenspan warned that if businesses don't make such an effort, lingering distrust by investors could prove to be a serious harm to the functioning of America's financial markets.

Greenspan said in order to restore trust, guilty parties ``should be expeditiously punished.''

He said that some rules governing the financial markets may need to be updated, but he cautioned against carrying regulation so far that it harms the proper functioning of markets.

``Rewriting rules that have served us well is fraught with the possibility of collateral damage,'' he said.