WASHINGTON -- Spurred by a meltdown in the stock market, Congress has passed with remarkable speed the biggest changes in corporate accounting practices in six decades. But now comes the big test: Will the legislation work?
Many market analysts believe the answer is yes and no.
The measure, they say, is tough enough to force companies to stop lying to investors about their true financial situations. But in the short term, these experts also say, the crackdown on fraudulent bookkeeping could drive Wall Street even further into the doldrums as the tougher rules and expanded budget given to the Securities and Exchange Commission flush out more companies with questionable numbers.
"It's going to take awhile for the market to rebound," said Robert Litan, director of economic studies at the Brookings Institution. "Investors have lost confidence in the whole system of reporting and that is not something that can be fixed just with legislation."
President Bush and members of Congress are hoping that a positive response from Wall Street will occur much more quickly, given that the November elections are fast approaching.
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