“Americans’ faith in stocks is being sorely tested,” writes Floyd Norris in today’s New York Times.

“Each day brings another corporate misdeed, another top executive in trouble, another company restating a profit as a loss, another auditor under fire for an accounting error. At the Securities and Exchange Commission, accounting investigations are being started at a record rate.”

“Many people on Wall Street are wondering when investors will say enough is enough and pull their money out of stocks and mutual funds, in favor of a mattress or some other safe place. But so far, investors have not withdrawn in droves from the stock market. Stocks fell sharply early in the day after disclosures of WorldCom’s accounting fraud of nearly $4 billion, but erased most of the losses in the afternoon.”

“Even the people most cynical about the state of corporate ethics have been reluctant to sell the bulk of their stocks and move money into bonds or money market funds, in part because interest rates are low.”

“The resilience of the market shows that many people still believe that stocks are the best long-term investment. In fact, their only hope of fulfilling their retirement plans is to achieve investment returns greater than those available in the bond market. So they stay invested in stocks, hoping for the best.”

“And it may be that for all the talk of disgust with corporate America, people do not necessarily feel that way about the stocks they own. That would echo polls over the years that showed Americans thought little of Congress, but were favorably impressed by their own representative in Congress.”

“A survey of affluent Americans, released this week by the U.S. Trust subsidiary of Charles Schwab, found that two-thirds did not trust management of publicly traded companies and that three-quarters questioned the reliability of corporate financial statements. But less than a quarter said they had moved money into safer investments.”