Quotes of the Day

George W. Bush has a story he's been telling about the scandals plaguing corporate boardrooms. After unveiling his new policies for cracking down on deceitful CEOs to Wall Street a few weeks ago, he was approached by an audience member eager to air his own proposals—a college-professor type, as Bush tells it, with ideas both windy and unwieldy. Then a "regular guy" interrupted. "If you want more corporate responsibility," the new arrival advised, "start throwing some of them in jail."

Because he believes it reflects his own life story, Bush loves it when the elite are upstaged by the streetwise. But he repeated the anecdote at the inaugural meeting of his Corporate Fraud Task Force because it reflected his own view: complex reforms of securities law are well and good, but the best way to assure skittish investors that the government is fixing the problem is to nab a few bad guys. Bush got his cue when federal agents hauled away the founder of Adelphia Communications and his sons in handcuffs in front of a bank of television cameras. "This government," Bush said, jabbing the air to punctuate his words, "will investigate, will arrest and will prosecute corporate executives who break the law."

The Adelphia scalps gave the Administration a chance to look as if it was taking charge amid the dreadful financial news. Through much of July, as toxic stock syndrome plunged the market to five-year lows and nudged his poll numbers to mortal levels, the President and his top economic advisers appeared helpless and sometimes befuddled. Wall Street was not impressed. As a private equities fund manager told Time, "It doesn't seem like his top priority. It doesn't seem like he understands. It doesn't seem like they have their act together." Each time Bush gave a speech promising to attack corporate malfeasance or insisting that the fundamental economy remained strong, his face on television was bracketed by graphs showing stocks in free fall. Inside the White House, Bush's number crunchers debated whether to goose the market with a tax cut or a round of spending but ended up telling him that the best policy was to wait for a rebound and not meddle.

Does another Bush not get it? Sure, the son has got to focus on a war to preserve the nation's security, as his father did. But like Dad, he misjudges the nation's economy at his peril. Bush has shown a willingness to inject politics into some economic decisions. He imposed tariffs on foreign steel and signed a subsidy-laden agricultural bill, tinkering with markets in order to placate crucial constituencies. But faced with corporate scandals and a market meltdown, our first M.B.A. President hadn't found an easy remedy. He could draw from his own business defeats some empathy for the everyday victims of the current market malaise. But one day he is ducking questions, insisting all that matters is the economy's reviving fundamentals. The next he is doing what an adviser calls "his Charles Schwab imitation"—discussing price-earnings ratios and suggesting that bonds might be a good buy. Even his speech to Wall Street on corporate misconduct, which was promoted as proof that he shared investor outrage, was unconvincing to some. "You can tell when he really cares about something, when he's into it," says an adviser to the President's father. "And he didn't look into it."

That may be because Bush doesn't believe the market's gyrations have much to do with the basic vitality of the economy. For plenty of Americans, especially the 60% who own stocks, they're one and the same. But Bush's view is "more old-fashioned," as an adviser puts it. To him, corporations and businessmen who produce things are the backbone of the economy, while the markets and investors are a vaguely sinister sideshow. Bush's first reaction to revelations of corporate misconduct was to assume the best. Yes, corporate America tripped up here and there, but the subsequent hysteria was stirred up by the overheated media. He didn't want to overreact lest he hamstring honest executives. "He didn't want to do something that would hurt the real economy just to fix a perception problem," says a senior adviser.

Bush came to his benevolent view of corporate America by way of Midland, Texas, where the young Harvard Business School graduate landed in 1975 hoping to strike it rich in the oil business. There, Bush recalls, businesses were filled with "good men" who would strike a deal on a handshake or the strength of a family name. When the oil boom went bust, as it did for Bush in the mid-1980s, small-business men didn't cash out their stock options and run; they took pay cuts and tried to help their employees. To Bush, Enron and WorldCom were aberrations, the fault of a few bad actors in an otherwise sound system. "We were, like, What in the world?" says Commerce Secretary Donald Evans of his conversations with Bush. "We were just kind of bewildered. It is unbelievable to us."

What does make perfect sense to anyone from those Midland days is to blame Wall Street. Bush remains distrustful and not a little dismissive of the investment bankers who swooped into Texas with saddlebags full of cash when oil prices gushed but galloped out of town when prices sank. Back in April, when the Dow hovered around 10,000, a White House economic adviser told the President at a social gathering that "there's no reason this market shouldn't be around 7500." According to an eyewitness, Bush made a face, turned and walked away, as if the subject bored or annoyed him. Last week Bush was back on memory lane. "When I used to watch the stocks ... in Midland, Texas," he said, "[I was] somewhat skeptical about what was taking place on the floors of these exchanges. They'll buy you or sell you, depending upon if it's in their interest."

Bush's distrust of financiers and faith in CEOs determined his economic team. The month before he took office, he told Time that he viewed economists as he did "accountants—you hire them." Bush "hired" Lawrence Lindsey, a former Federal Reserve governor, for the backstage role of national economic adviser. And he chose Glenn Hubbard, an economics professor, as chairman of his Council of Economic Advisers. But for the out-front post of Treasury Secretary, Bush chose the CEO of aluminum giant Alcoa, Paul O'Neill, whose skepticism about investment bankers mirrored his own.

O'Neill was derided as an outsider by Wall Street and Washington, but that never troubled Bush. He considered it an asset. Yet O'Neill's stint has been rocky from the start. His penchant for making off-the-cuff quips on everything from Argentina's economic collapse to the merits of a strong dollar has roiled markets around the world and cost him the limited clout he had on the Street. "It's not that he's bad, and it's not that he's dumb," says a New York banker who attended a meeting with O'Neill last week. "It's just that he has no gravitas. And once you lose it, you can't get it back." O'Neill's habit of being out of the country during times of economic turmoil has led even some Republicans to call for his ouster. "O'Neill's been traveling everywhere but Main Street and Wall Street," G.O.P. Congressman Mark Foley of Florida told Time. "The Administration needs a central figure who can deliver a clear, potent message on the economy." But O'Neill scoffs at the notion that a Treasury Secretary's job should include trying to calm the markets or reassure the public. "I'm a little dubious," O'Neill told Time, "that in the middle of a hurricane, a soothsayer can make the wind go away."

It doesn't help that Bush's economic advisers don't play well together. Disputes among Lindsey, O'Neill and Hubbard have become so acrimonious that they have begun seeping out of this famously buttoned-up White House. Lindsey can roll his eyes when asked about O'Neill's latest unscripted remark. And according to allies, he has complained that Hubbard's status quo views have persuaded the President to reject as interventionist even modest new policy steps. The President's top economists, says a senior Administration official, "disagree on the analysis before they ever get to the remedies."

Bush may cling to his belief that the market's woes won't affect the basic soundness of the economy, but he knows from his father's experience that politicians who don't appear to take voters' pocketbook fears seriously pay for their callousness at the polls. "This President is acutely aware of the impact of the economy, both on regular Americans and on Presidents," says Mark McKinnon, a campaign 2000 veteran who still advises Bush. "Americans fundamentally understand a President can't move the markets, but they want to be assured that he cares about it and is doing all he can."

So prepare to see an Administration in motion. The President will hold a lavish ceremony this week to sign the corporate-responsibility bill. O'Neill, Evans and others will attend a series of events promoting good news about the economy. To ward off charges that Bush is lounging on his ranch while the economy burns, he will make trips into the "heartland" to meet with anxious Americans. Topping it off, he will host a day-long economic forum in Waco, Texas, on Aug. 13.

The folks at the White House are hoping all that activity convinces voters that the Bush team is finally on top of things. Meanwhile, they're praying that the "real economy" stays stable and the markets settle down. More made-for-TV indictments are likely this week, which will help too. But just in case, one topic slated for discussion at the Waco forum is—as White House communications director Dan Bartlett puts it—"ways to avoid a double-dip recession." And as some economists point out, on a graph, a double-dip recession looks like a W.

—With reporting by Michael Duffy/ Washington

• James Carney and John F. Dickerson / Washington
• Bush may be an M.B.A. and a former CEO, but his experiences haven't taught him to warm to Wall Street. Here's how the President does his figures