It's too bad that "Scandal Inc." isn't a publicly-traded enterprise. If it was, this would be the time to take a bet-the-mortgage long position. Scandal is poised to be an explosive growth industry in the next couple of years.
And I don't mean garden-variety scandals, with a few headlines and maybe a hearing wherein our elected blowhards appear nearly as unbearable as the villain. No, I mean scandals with consequences -- where public anger becomes deep and wide and scandal-tainted individuals are convicted and sent to jail.
Emphasis on "deep," "wide," and "public anger." It's the sentiment that follows when the stock market crashes and/or suffers a very large bear market. The 1929 Crash and Great Depression is the most famous example: the chairman of National City Bank (Citibank) was indicted for tax evasion and forced to pay a huge civil fine; the president of the NYSE eventually went to prison.
Not until the 1970s did another major bear market commence. Were there any memorable around then? Ummm, consider the "coincidence" of this timeline. The bearish decline began in January 1973: that just happened to be the month when the Watergate burglars were tried & convicted, and the public started paying close attention. The scandal grew as many major political figures were indicted and eventually sent to prison, including the Attorney General of the United States. The scandal led the news every day for months on end. President Nixon resigned in August 1974; less than two months later the bear market ended, but only after the S&P 500 lost almost half its value.
Fast forward to 2000-2002 -- not long ago, I'm sure you remember some of the particulars. Another major bear, eventually larger than the '73-'74 decline. People were angry. As for scandals, "Enron" should suffice, but there were others around that time.
Now we're in 2008. People are really angry. Remember how the volume of incoming calls against the $700 billion bailout nearly shut down the congressional phone system? Stocks are down more the 40% year-to-date, yet the major leg of the decline began barely three months ago. The economy looks like it will soon begin playing catch up to the pace and depth of the market decline.
Given the bankruptcies, blow-ups and losses so far, there's no shortage of villains to hold up to public scrutiny. Bigger ones may surface. Watch for the judicial system to stop being about process (equal justice under law), and to start being about outcome (just find the S.O.B. guilty of something!). That's when things turn ugly.