Don't blame 9/11 for the bear market. Blame the corporate scandals.

One year after Sept. 11, it's clear that investors have suffered immense losses because of the actions of a wicked, bearded foreigner. This outwardly pious but inwardly corrupt evildoer, who has shattered the hopes and dreams of thousands of Americans, has become a recluse, fearing to venture out in public and targeted by federal authorities.

Of course, Bernard Ebbers, the Canada-born former CEO of WorldCom hasn't committed mass murder. He hasn't even been charged with a crime—yet. And like Osama Bin Laden, he certainly wasn't alone in wreaking havoc. But his actions, and those of his deputies at the company he created and ran, may have been the straw that broke the back of a market whose post-9/11 resilience was both remarkable and unanticipated.

When the Twin Towers fell, pundits worried that the market would collapse with them. But while 9/11 certainly hammered some sectors—airlines and hotels, to name two—it didn't cause lasting damage to the economy or to investor psychology. By contrast, the series of faith-draining corporate scandals that culminated with the July 21 bankruptcy filing of WorldCom may have finally accomplished what the dot-com bust, the fiber-optic meltdown, Osama Bin Laden, and even Enron couldn't: It persuaded investors to abandon stocks.

Wall Street and the stock market suffered grievous blows on Sept. 11, 2001. Thousands of financial-services industry employees were murdered; firms like Cantor Fitzgerald and Sandler O'Neill were crippled. The New York Stock Exchange shut for four trading sessions.

But the recovery effort was stupendous—and swift. By Monday, Sept.17, the exchange reopened for business. Investors sold, yes, but they didn't give up.

One way to measure people's faith in stocks is the inflows and outflows at U.S. stock mutual funds. According to the Investment Company Institute, $29.51 billion flowed out of stock mutual funds in September 2001, or 0.87 percent of assets. That's a lot of dough, but in percentage terms it wasn't catastrophic. And the exodus was far less dramatic than the one in October 1987, when investors yanked 3.1 percent of all their cash out of the market.

Stalwart consumers, calm institutional investors, companies eager to kick-start the economy, and an accommodating federal government helped restore confidence. The Federal Reserve Board slashed rates aggressively to historically low levels. Fiscal policy helped, too, as new spending on defense and recovery efforts provided a needed stimulus.

So while the Dow plunged 14 percent in the weeks after the attack, it recovered quickly. By Oct. 16, the S&P 500 had reached its Sept. 10 level, and the indexes powered higher in early 2002. In every month between October 2001 and May 2002, investors put more cash into the market than they took out. Net inflows into U.S. stock mutual funds were a robust $14.9 billion in November, $19.6 billion in January 2002, and $29.3 billion in March 2002.

But it all came to an end in this summer. In the past two months, investors have witnessed the arrest of Adelphia founder John Rigas, the rehashing of the Bush-Harken and Cheney-Halliburton stories, the arrest of former ImClone CEO Samuel Waksal and the coincident immolation of Martha Stewart, the rise of New York State Attorney General Elliott Spitzer—the Savonarola of Wall Street—and the demise of Citigroup uber-analyst Jack Grubman. WorldCom, which flailed for weeks before declaring bankruptcy on July 21, 2002, was the granddaddy of them all, the Rose Bowl of stock scandals.

WorldCom had more employees than Enron and a greater valuation at its peak than the Houston energy company. Enron CEO Ken Lay borrowed tens of millions of dollars from Enron; Bernard Ebbers borrowed $408 million—and didn't pay any of it back. Enron fudged the numbers by hundreds of millions, WorldCom by billions. Enron's misdeeds were shrouded in obfuscation; WorldCom's misallocated expenses were baldfaced lies. Joined at the hip to his banker/consigliere Grubman, profiting immensely from sweetheart IPOs, Ebbers seemed the nexus of everything wrong with Wall Street.