Federal Reserve Chairman Alan Greenspan is likely to tell Congress the US central bank acted quickly to rebuild confidence in the US financial system and will lower interest rates for a ninth time this year if necessary to prevent a recession, analysts said.
"I saw the Fed somewhat tiptoeing before, and now I see them taking giant steps," said Dennis Burnette, CEO of Cherokee Bank in Canton, Georgia.
"They are switching their role from inflation-fighter to a new priority of keeping the economy going and keeping us out of recession."
Greenspan's testimony to the Senate Banking Committee will be his first public comments since terrorist attacks on New York and Washington. On Wednesday, he cautioned congressional leaders that "we need to get a better assessment of the overall impact" of the attacks before deciding what steps to take to stimulate the economy, according to House Leader Dick Armey.
Boeing Co, the largest aircraft maker, has said it will fire as many as 30,000 people over the next year and AMR Corp, parent of American and TWA Airlines, said it will fire 20,000 workers because the attacks led to declines in sales. UAL Corp's United Airlines said it will also dismiss 20,000 employees.
Greenspan will testify on Thursday at 10am Washington time with Treasury Secretary Paul O'Neill, who has already warned that the airlines need government aid to prevent wholesale bankruptcies.
"The airlines need cash," O'Neill said yesterday. "We should give them liquidity and we should do it quickly. If they need money we should give them money."
Airline officials have asked Congress for US$17.5 billion in aid.
Greenspan met privately at the Capitol yesterday with Senate and House leaders of both parties, White House economist Larry Lindsey and former Treasury Secretary Robert Rubin, now chairman of Citigroup Inc's executive committee.
They discussed aiding the airlines, cutting the capital gains tax, accelerating income tax cuts enacted earlier this year, and reducing taxes on business earnings, Armey said.
Since the Sept. 11 attacks, the Dow Jones Industrial Average has plunged 9 percent, crude oil prices have fallen about 4 percent and yields on two-year notes have fallen as low as 2.8 percent, the lowest since 1958, as investors raced to buy safe- haven assets.
On Monday, before stock trading resumed in New York for the first time since the attacks, the Fed cut its benchmark overnight bank lending rate a half percentage point to 3 percent, the eighth cut so far and the third reduction between meetings. The Fed's next policy meeting is Oct. 2.
The statement accompanying the most recent rate cut said the Fed "will continue to supply unusually large volumes of liquidity to the financial markets, as needed, until more normal market functioning is restored."
It was similar to a Fed statement released during the country's last financial crisis, on Oct. 20, 1987, when the central bank affirmed its "readiness to serve as a source of liquidity to support the financial and economic system."
"The Fed moved preemptively in an attempt to show faith and provide a stimulus to the economy," said DR Grimes, chief executive of Net.B@nk Inc, the first profitable Internet bank in the US.
The central bank flooded the banking system with cash for six consecutive days, adding as much as US$81.25 billion last Friday and US$27.6 billion yesterday, compared with a US$5.3 billion daily average in the previous six weeks. That pushed the actual overnight interest rate as low as 0.06 percent -- below the 3 percent target.
The Fed has also sought to ensure overseas financial institutions have had easy access to dollars by selling US$80 billion to the European Central Bank and the Bank of England, and by raising an existing credit line with the Bank of Canada to US$10 billion from US$2 billion.
"The financial system is the blood supply of our economy, and it relies heavily on the fluid movement of capital," said James Glassman, senior US economist at JP Morgan Chase. "The Fed's role was to help restore the functioning of the financial system, and on that score it's doing a great job."
O'Neill is likely to repeat his recent assessment that the economy will recover quickly.
"The long-term resiliency of the American economy is there," O'Neill said yesterday on PBS's Newshour with Jim Lehrer.
"I believe our economy is so strong compared to all the other economies in the world, the American people are such a great people and we know how to create productivity we will have new highs in our market indices in the foreseeable future."
As well as promoting a positive outlook for the economy and financial markets, O'Neill is advising President George W. Bush about the need for spending money and cutting taxes to finance rebuilding, boost growth and assist troubled industries.
In August, the Congressional Budget Office projected a budget surplus of US$153 billion this year. Economists now expect the Bush administration and Congress to tap much of that excess.
Congress has already pledged US$40 billion in emergency aid. On top of that, the airline industry, hurt by two-days of shutdowns, diminished demand and higher security costs, is seeking more than US$17 billion in financial assistance.
Bush is also mulling an economic stimulus package. Capital gains tax cuts, increased unemployment insurance benefits, an investment tax credit and tax rebate checks for low income workers are among the ideas being discussed, according to legislators and administration sources. Additional spending on transportation infrastructure, intelligence and defense is also likely, analysts said.
"The natural instinct is to open up the government's wallet and start spending money but there's a smart way to do it and a bad way," Glassman said. "The smart way is spend your energy and resources in shoring up the public confidence in flying again."
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique