BOSTON - The glass is one-quarter full and not three-quarters empty for Ronald E. Logue, president and operating chief at State Street Corp. of Boston.

"The truth is, some of us have been through times worse than these. In some aspects, we're fighting a war of attrition," said Logue, speaking at a lunchtime address at the National Investment Company Service Association's East Coast regional meeting here last Wednesday.

"Today's subject, The State of the Industry,' is daunting for me. Things are a lot less simple than they were two years ago," he said, noting the current conflicts with Iraq and North Korea, the state of the stock market and the now ever-present threat of terrorism.

Logue, in charge of State Street's $6 trillion asset servicing business, appeared to be trying to make the best of a bad situation and draw positives to build upon, rather than focus on all the negatives that have happened in the industry since the market went South. "It's hard to be positive, but there are some positive trends. We remain a long way from disaster," he said.

Citing what Logue called the "normal after-effects" of a bubble bursting, he noted the record number of bankruptcies in Europe and Japan, and the fact that a down market cleanses inefficient businesses.

Another positive stemming from the down market is the reevaluation of how executives are compensated (see special compensation report, page one). The trend of bonuses more closely tied to performance will continue, Logue predicted. He also said he sees a greater move towards "corporate transparency."

A New Type of Investor

When the smoke screen put up by corporate America's crooks clears, a new form of investor will emerge, Logue said. Logue said the key right now is to give the badly shaken investing public what they want, and what they want is trust and control. "Those who give it to the investor will win."

However, giving control can't come without increased responsibility on the part of the investor. "I don't think you can just give control. You have to give control and professional guidance. There has to be participation, but it has to be educated participation." However the infrastructure to do this is not in place yet, he said.

Some of these new investors will seek to manage their own accounts since their confidence in institutions is destroyed, but Logue expects most clients will want to be much more educated and increasingly vigilant. He also expects the retirement age will have to rise, particularly in Europe, where many first-time investors "lost their shirts."

Logue expects the rise in interest in relatively low-risk products will allow companies to regain investor's trust.

Where the Action is'

When asked what he sees as untapped foreign markets, he named the U.K., Germany and Italy, among others. "Europe is where the action is. Asia some day - the potential word is when."

Other noteworthy remarks came when Logue was asked about the future of technology in the industry. Logue said he thinks it's going to become increasingly difficult for the industry, particularly smaller firms, to continue to invest large sums of money in technology. To put that in perspective, he said 25% of State Street's operating expenses are in technology.

And, after initially declining to comment on President Bush's proposed tax plan, he said of the dividend: if it was targeted at the corporate level, it may have more of an effect.

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