View From New York: Merrill works to set the fax straight

Paramount executives weren't the only ones suffering from motion sickness this week. It seems the new openness at the US Federal Reserve Board has induced something akin to vertigo among economists at Merrill Lynch of late.

Like many on Wall Street, they were taken by surprise last month when the chairman, Alan Greenspan, breaking with hallowed Fed tradition, announced a change in US interest rates within minutes of the board's actual decision on 4 February. Merrill had assured clients the move wouldn't come that day, and when it did, was obliged to send a fax to each of the tens of thousands of subscribers, titled 'Fed Tightens Policy.'

When the Fed's open market committee met last Tuesday, Wall Street was determined not to be caught off guard. Merrill in particular held its counsel, refusing interviews until after 11:30am, the time when the Fed usually acts out its intentions in the bond market.

Its only intervention was the execution of short-term lending agreements with leading US banks - hardly a move to drain liquidity from the system, but Merrill economist Bruce Steinberg held off for another two hours before faxing out his judgement: 'No Fed Tightening Today'.

Minutes later, the meeting broke up and Mr Greenspan issued a cryptic statement about 'increasing slightly the degree of pressure on reserve positions'. Mr Steinberg ran back to the fax machine: 'Fed Tightens]'

'People are going to wonder why we had such a large fax bill,' Mr Steinberg told one reporter.