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Week in Review

September 21, 2003

Stock Market Chief Resigns in Pay Furor

New York Stock Exchange Chairman Richard Grasso resigned Wednesday, unable to withstand the uproar over a $140-million pay package that critics said made him look more like a symbol of Wall Street greed than one of the world's most important financial regulators.

In an emergency board meeting convened 15 minutes after the stock market closed for the day, NYSE directors requested, received and accepted Grasso's resignation, climaxing an increasingly bitter three-week flap that market professionals said was tarnishing the Big Board's reputation and becoming a major distraction from its business.

In his first public appearance as the temporary leader of the NYSE, director H. Carl McCall promised Thursday that the exchange would "operate differently" from the way it did under Grasso.

For one thing, McCall said, the Big Board would pay more attention to its prime customers, including the giant California pension funds that helped precipitate Grasso's resignation.

McCall took himself out of the running for Grasso's job, as did several other prominent figures floated as candidates.

The markets largely shrugged off the turmoil. For the week, the Dow rose 1.8%, the Nasdaq gained 2.7%, and the S&P advanced 1.7%. The Dow has gained in six of the last seven weeks; the Nasdaq and S&P have posted wins in five of the last six weeks.


U.S. Vows to Pursue Pacts Outside WTO

Faced with a disappointing setback in global trade talks, U.S. officials vowed to push forward on bilateral and regional border-opening agreements to create a coalition of countries that are enthusiastic supporters of the U.S. trade agenda.

A senior official, who insisted the United States was not looking to "place blame" for the failure of the World Trade Organization talks in Cancun, Mexico, said Washington would find other ways to advance trade liberalization if the global effort bogged down further because of increasing acrimony between rich and poor nations.

The WTO talks in the Mexican resort were halted abruptly last Sunday after about 90 developing countries represented by Botswana refused to consider adding new issues to the agenda, contending that the United States and the European Union had failed to live up to promises to slash their farm subsidy programs.


Senate Rejects Rules on Media Ownership

The U.S. Senate voted to reject media ownership rules approved by the Federal Communications Commission that would clear the way for greater media consolidation.

The rules, which a Philadelphia appellate court already had blocked, would permit mergers between TV station owners and newspapers in the same market and allow broadcasters to expand their reach locally and nationally.

The 55-40 bipartisan vote in support of a rarely invoked legislative veto is likely to prove symbolic. Leaders in the House have said they had no plans to consider a similar move, and President Bush has threatened to veto any effort to block the FCC from implementing the new rules.


BofA Broker Charged in Illegal Fund Trading

New York Atty. Gen. Eliot Spitzer's probe of the mutual fund industry yielded its first criminal prosecution when a former Bank of America Corp. broker was charged with helping a well-heeled investment firm conduct illegal fund trading.

In a complaint filed in state court in Manhattan, Spitzer accused the ex-broker, 36-year-old Theodore Sihpol, of grand larceny and securities fraud, alleging that he helped a private investment group, Canary Capital Partners, engage in the late trading of mutual funds. The Securities and Exchange Commission filed a separate civil action against Sihpol.

The criminal complaint comes two weeks after Spitzer rocked the $6.9-trillion mutual fund industry by revealing his investigation into whether a wide swath of fund companies let privileged customers engage in trading practices that collectively may have cost small investors billions of dollars.

Spitzer told reporters that his investigation was "likely to result in numerous other charges."

Sihpol's attorney, Don Buchwald, said his client would plead not guilty.


'AOL' Shed From Media Giant's Name

When it came time to christen the world's largest media conglomerate three years ago, there was no question which company's name would come first: that of highflying Internet service provider America Online.

On Thursday, AOL Time Warner Inc.'s board of directors voted to erase the most visible reminder of that ill-fated marriage of old and new media. The company will be known as Time Warner Inc., reverting to the name of the stalwart entertainment and publishing giant that was gobbled up by the cocky dot-com.

The merger that created AOL Time Warner was supposed to reinvent the media world by meshing prized entertainment assets with the Internet's ability to deliver. At the time, it was hailed as nothing less than a model of the New Economy.

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