Greenspan grilled over `exuberance' comments

Alan Greenspan, chairman of the Federal Reserve, came in for some tough questioning from the House Budget Committee about his recent remarks about "irrational exuberance" which sent shudders through world markets.

Congressman Jim Bunning asked Mr Greenspan: "Why have you on two occasions taken to jawboning the US stock market and the US bond market with your comments?

"How come when you spoke on two occasions we had a sell-off in the Dow Jones, a sell-off in the Nasdaq and a sell-off in the bond market of considerable magnitude?"

Mr Greenspan replied: "That was not what I was intending to do. These are very ... elaborate international markets which are driven by decisions of millions of people. Nobody can affect them in a fundamental way. What I was trying to do in December, and what I did in my Humphrey-Hawkins testimony last week, was to try to lay out all of the various factors which we examine for purposes of monetary policy."

On the outlook for the economy, Mr Greenspan said the most likely prospect for the US was sustainable growth, accompanied by low and stable inflation. "The performance of the US economy over the last year has been quite favourable, with few signs of the imbalances that might typically have been expected by the sixth year of a cyclical expansion," he said.

The index of US leading economic indicators, intended to project economic activity over the next half year, rose in January, the 12th straight month without a decline and the longest such string since 1984. The Conference Board's index, a composite measure of 10 economic indicators, rose 0.3 per cent in January after rising an unrevised 0.1 per cent in December. Before the report, analysts had expected a 0.1 per cent gain for January.

Mr Greenspan said a significant drop in long-term US interest rates was possible if Congress and President Clinton could arrive at a credible plan to balance the budget. However, such a plan would almost certainly need to include measures to curb the growth in entitlement spending, he said.

"I would think that if you get a credible budget projection which really altered the future projection of entitlements by changing the law today ... I think the markets would respond quite positively," he said.

Speaking about the reduction in long-term interest rates that would result, he said: "It's hard for me to put an order of magnitude on it but clearly it could be significant."

But in late trading last night Wall Street succumbed to last- minute nerves ahead of the second phase of Mr Greenspan's Humphrey-Hawkins testimony today. The Dow Jones ended 66 points down at 6853.

Shares in London were more buoyant with the FTSE 100 ahead 50.6 points at an all-time high of 4,357.7.

Market report, page 23

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'