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
PROMOTED VIDEO
Arts and Entertainment
British musician Mark Ronson arrives for the UK premiere of the film 'Mortdecai'
music
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
Sport
footballBrighton vs Arsenal match report
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us