“Alan Greenspan, the Federal Reserve chairman, pointed Tuesday to a corporate culture blighted by “infectious greed” as the cause of the breakdown in confidence among investors. With political pressure growing and the stock market falling, the House hurriedly passed a measure that would toughen criminal fraud penalties to curb corporate wrongdoing,” writes Richard Stevenson in today’s New York Times.

“Mr. Greenspan’s blunt testimony to Congress about avarice in the executive suite and the rushed effort by Republican leaders in the House not to be outdone by the Democratic-controlled Senate in legislating stiff sentences for corporate wrongdoers were the latest indications of how deeply questions about business integrity are reshaping both politics and economic policy.”

“The rapid-fire legislative maneuvering was noteworthy because the Republican-controlled House, which passed its own accounting and corporate governance measure in April, had previously urged a more limited scope to new laws and regulations than had the Senate and had not initially addressed criminal penalties. But with new accusations of accounting impropriety and corporate misconduct, as well as a continued tumble in stock prices, Republican leaders quickly came up with their own legislation.”

“After falling more than 200 points Tuesday morning, the Dow Jones industrial average pared its loss to about 20 points during Mr. Greenspan’s appearance on Capitol Hill, in which he reassured investors that the economy was fundamentally sound and poised for improvement.”

“But stock prices headed down again in the afternoon, defying any hope on the part of Mr. Greenspan — as the market had defied President Bush’s two attempts in the last week to instill confidence among investors with speeches emphasizing the positive — that he might break the negative psychology on Wall Street.”

“For the day, the Dow dropped 166.08 points, to 8,473.11, bringing its loss over the last seven sessions to more than 900 points.”

“With both parties watching closely for outcries from individual investors, House Republicans, some of whom had previously warned against overreacting to accusations of falsified earnings and other misconduct, moved quickly today to insulate themselves politically from appearing to be too close to business.”