Embargoed Until 12:20 PM Contact: Michele Davis

July 10, 2002 (202) 622-2920

**Treasury Secretary Paul H. O'Neill**

**Remarks to the U.S. Chamber of Commerce**

**"Rebuilding Trust in Corporate America"**

**Washington, DC**

Good afternoon. Thank you for your kind introduction, Tom (Donahue, CEO
of U.S. Chamber of Commerce).

The United States economy today is the strongest and most resilient in
the world, and the strongest and most resilient of any economy in
history.

Our economy surged at a 6.1 percent annual rate in the first quarter,
the fastest pace in more than two years, and a phenomenal performance
compared to forecasters' expectations. Although the second quarter is
not likely to match the first, there are continuing signs of strength in
this recovery. New home sales set a record level in May, consumer
spending remains high, and there is evidence that non-defense capital
goods investment rose in the second quarter, ending nearly a year and a
half of declines.

The fundamentals are sound, with inflation low and productivity booming.
Business profits are up, real wages are growing, and industrial
production is increasing. In June, the number of new jobs went up for
the second month in a row. Thanks in part to low interest rates and
President Bush's tax cuts, this recovery is well underway. I continue to
believe that by the end of this year we will see 3 to 3-1/2 percent
growth.

Sometimes we forget, especially in Washington, that the foundation
beneath our economic strength is the everyday hard work of business
owners and employees throughout this country, many of whom are
represented in this Chamber of Commerce. I'm talking about the kind of
people who get up at the crack of dawn, unlock the store, and spend
their days smiling at customers, (even when they'd rather throttle
them). People who spend their nights and weekends minding the books, so
they can pay their bills, make their payroll, and get their kids through
school. People who have built this country, one product, one sale, and
one job at a time.

**PO-3241**

These Americans, whether they work in a store, a factory, a farm, or an
office tower, are investing their time in an honest day's work, building
a future for themselves, their families and this country. And when they
choose to put their hard-earned wages into shares of public companies,
they are investing in this country again.

They are entrusting their savings -- the down payment for a first home,
the money for an engagement ring and a wedding, college tuition, funds
for a family vacation, their retirement, in short, their financial
freedom and independence -- to corporate managers, whom they expect to
be just as honest and straightforward. Our citizens trust that public
companies will respect the savings in their care, working to maximize
their return by creating real value.

Through much of the past decade, that trust paid well. New technologies
boosted productivity, profits grew and the stock market soared. But
amidst that exuberance, some people seem to have started believing that
anything goes.

We've learned recently that certain corporate leaders, abetted by their
auditors, violated the public's trust. In their greed and their
gluttony, these crooks sacrificed the retirement years of teachers,
truck drivers, nurses and farmers to enrich themselves.

Just as bad, they have disgraced the institutions that have allowed our
nation to prosper, and brought shame on freedom itself.

I am furious. President Bush is furious. And we are going to make sure
these thieves face consequences. These guys are not going to spend those
stolen retirement years on balmy islands, swatting golf balls. The
President has said that CEOs who cook the books will forfeit their
ill-gotten gains, and they will go to jail.

Since the earliest days of these corporate scandals, President Bush has
been advancing a reform agenda to find and punish corruption; hold
corporate officers accountable; protect small investors; clean up
accounting practices; strengthen the corporate audit system; and provide
honest and accurate information to investors. The President's ten-point
plan to improve corporate governance and disclosure, which he proposed
on March 7, is now coming into place, thanks to aggressive leadership by
Harvey Pitt and the SEC.

The plan requires that chief executives and chief financial officers
personally certify the accuracy, timeliness and completeness of their
companies' public disclosures and financial statements. In fact, Harvey
Pitt has already written letters to the top 1,000 CEOs, requesting that
they do just that -- personally review and recertify their recent
financial statements.

With the highest position in a company comes the highest responsibility,
both to know what is going on in the firm, and to give investors an
honest and accurate picture of the company's situation. Outside auditors
should have to make the same independent certifications.

The SEC has also issued new rules to keep investors better informed.
Companies will have to illustrate the impact of their accounting choices
on their financial statements, and they will inform investors more
quickly and clearly about significant events. The SEC has already put
teeth in its policy that technical GAAP compliance is not the same as
sufficient disclosure.

And for those who don't live up to the standards of honesty and
accuracy, the President is insisting on stiff punishment, doubling the
penalties for financial fraud. Under today\'s laws, a kid caught with a
half a gram of marijuana gets a stiffer sentence than a corporate chief
who steals millions from investors. That\'s not right.

The President requested months ago that Congress provide major increases
in budget and personnel for the SEC, so our law enforcement officers can
get the job done. Already, the SEC has doubled the rate of executive
disgorgement cases this year over the rate in 2001. Working through the
courts, the SEC has also stepped up bans of corrupt directors and
officers, preventing them from serving in other companies.

Finally, the President made strong recommendations to align compensation
plans, including stock options, with the long-term interest of
stockholders. On television these days we see executives at
scandal-ridden companies who pumped up share prices and cashed out their
options before the axe fell. And then we see faithful employees and
duped shareholders and pension funds left behind to gape at their
losses. That's wrong, and it must not continue.

When I was at Alcoa I never sold a single share of Alcoa stock.  I
wanted my financial success and the company's success inextricably
linked.  Other executives should do the same. Stock options are not a
short-term reward, they are a long-term incentive to do the right thing.

The President has called on the nation's stock markets to require that
listed companies receive shareholder approval of all stock option plans.
And he called on CEOs to explain how their compensation packages are in
the best interest of shareholders.  Well-informed shareholders, not the
government, are in the right position to decide what compensation plan
will best align management interests with the long-term interest of the
shareholders.

We are improving the system on every front. The SEC's proposals are
moving forward. The stock markets are beefing up corporate governance
requirements for listed companies. And Congress is developing
legislation to ensure corporations and their auditors meet standards for
accuracy, honesty and timeliness. The House has already acted, and the
Senate is working at this very moment.

We support the intentions of the Senate bill, but we have reservations
as well. In particular, contrary to the President's request, the Senate
bill does not provide the SEC with the authority to bar individuals who
engage in serious misconduct from serving as officers and directors of
any public company. The SEC needs this new authority to punish those
that have proven themselves unworthy to serve shareholders.

We are also concerned that the Senate proposal gives the power to
enforce securities laws to an unaccountable private body, which is not
consistent with our sense of responsible law enforcement. Moreover, this
new "accounting oversight board" would be redundant and competitive with
the SEC. We do not need that kind of bureaucratic confusion undercutting
enforcement efforts, and letting villains off the hook.

Instead, the Administration believes that a two-tiered regulatory
framework will best protect investors. The SEC recently suggested an
independent accounting oversight board to set, oversee, and enforce
professional audit and ethics standards. The SEC itself would continue
to investigate and enforce violations of the securities laws. These
clear lines of authority will ensure that the Accounting Board and SEC
are both fully accountable.

I'm eager to work with the Congress to get legislation to the President
before the August recess to restore accountability and integrity to our
corporate governance and disclosure system. But new laws alone cannot
make a perfect world. We have laws against bank robbery, but we still
have bank robbers. We need the other institutions of our free market
system to reinforce the call for higher standards. That is why I applaud
actions by private organizations, such as the New York Stock Exchange
and the National Association of Securities Dealers, to create better
rules for their membership, independent of our work in Washington.

Most of all, I call on true corporate leaders, those who cherish their
freedom and the success our system has allowed them, to stand up and
defend the values of honesty, integrity, and accountability. I believe
that most executives accept and live up to the principle that with the
big job comes big responsibilities. Leadership means more than keeping
your head down and following the rules. It means instilling a value
system that runs throughout your company.

Most of the things being proposed for regulation and legislation are
things that you and I and most of the CEOs we know have practiced for
years, because they are common sense and they are the right things to
do.

No government can compensate for a lack of an articulated value
structure from the top. Face it: the 90s are over. Now is the time for
sober virtue. Investors are demanding information, and because our
system works, they are going to get it. Companies that take steps now to
examine their practices -- from disclosure, to accounting, to
compensation -- will ensure that they meet shareholder expectations.

By getting accurate, timely, plain-English information to investors and
employees they will earn the public's trust anew. People across this
nation will again feel confident that they can safely invest their
life-savings in American business. And acting individually to do what's
right, corporate leaders will collectively strengthen the U.S. economic
system.

Our economic system remains the envy of the world. Together the
President's proposed reforms and leadership in the corporate world will
make that system even better.

Thank you.