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CNN Live Today

Greenspan to Testify Before House Committee

Aired July 17, 2002 - 10:07   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: Turning now to Capitol Hill this morning, Alan Greenspan briefly bolstered investor confidence yesterday with his generally upbeat testimony, but today there is going to be even more coming from the Fed chief on the corporate scandals which undermined that confidence in the first place.

For a preview of all that, let's check in with our financial news reporter Kathleen Hays -- and Kathleen, before you get to your report, I want to ask you, have you seen the numbers coming in this morning from the markets? Every one of them is positive so far.

KATHLEEN HAYS, CNN FINANCIAL CORRESPONDENT: It is a beautiful thing, isn't it, Leon? Look at that. The Dow Industrial is up nearly 200 points, right out of the gate. The Nasdaq, also surging higher. At very least, we could say, Look, after seven consecutive days of losses on the Dow, you can't help but think that the big players said, This market is what the pros call oversold. Just so much selling, you got to get in there any buy.

In addition to that, though, we have had some pretty positive earnings news, including GM yesterday, positive earnings and a positive outlook. So, investors are perhaps starting to get the idea that the economy, and firms, as Mr. Greenspan has been saying for a while, are on solid footing. Maybe not roaring ahead, but on a solid footing.

HARRIS: Do you think, if you had to hazard a guess here, this means that the consumer, and not necessarily the institutional trader or the professional brokers right now, that it is the consumer, basically, that has actually, basically, taken their lumps and gotten out by now, and it is all over with?

HAYS: Well, I think there is probably two classes of investors, Leon. People like you and me, some of us have stayed in the stock market. We have ridden this thing down. Maybe our stocks are in our 401(k) and it wouldn't do us any good to take a loss because those are, you know, not taxable accounts. So we are saying, Gee, I'm in it for the long-term, I am going to ride this out.

There obviously have been people who said, finally, I can't stand the pain, or they bought into stocks early enough that they still had some profit left. So, over the last couple of weeks, they have been bailing out. But, perhaps we have seen enough of that that now people are willing to say maybe the bottom is in. We talked to a long-term stock investor commentator, Hugh Johnson of First Albany, on Monday on money markets on CNNfn. And Hugh said he thought just maybe that day when we had more than 400 points down, and the sharp reversal could be the end of the bear, and the baby, baby beginning of the bull. We have to see how things go today.

Certainly, Mr. Greenspan's remarks were soothing to investors, soothing to the markets. You had to figure he is going to come in and be as positive as he can, but everything he said about the fundamentals of the economy rings true. The housing sector is strong, housing construction continues to remain at healthy levels.

Refinancings -- we got numbers from the mortgage bankers this morning. Refinancings continue to climb, and that puts money back in our pockets. I think the fact that another top official had harsh words for the misdeeds of CEOs, saying we have to punish them, but putting it in perspective, saying that in the huge bubble of the late '90s, so much money, run up in stock prices so incredible, it gave people incentive and the means to do those shenanigans with accounting.

He made the point that, Look, we -- that incentive doesn't exist because stock prices are down so much, and you can't cover up your misdeeds as easily now, suggesting that this was an episode that is going to pass, not something that is endemic or permanent in this system that investors should be wary of, and I think all those helped.

Again, I think the bottom line is that people who really follow the stock market closely are looking at fundamentals of the companies, looking at fundamentals of earnings, seeing some good news out there, and figuring, especially with stocks at much lower levels, there is some reason to come in and buy.

HARRIS: So the expectation this morning, then, is that Chairman Greenspan, when he speaks today, is actually going to -- just, perhaps, reaffirm that -- that positive feeling that he started doing yesterday, and that perhaps this will take off even further? Do we expect to hear him say anything new or different today?

HAYS: Good question, Leon. First of all, this is a traditional twice a year gig for Mr. Greenspan. He goes to Capitol Hill. He first speaks to the Senate or the House, and then subsequently to the other side of the Congress, and he will just repeat yesterday's testimony. He may be reading it into the record, and then he will take questions and answers. I'm sure he will get a lot more questions today about his view of the economy, also what he thinks we should do about the corporate accounting scandals.

He indicated yesterday that he thinks we've got plenty of laws on the books, we just need to enforce them, maybe we need stiffer penalties, maybe we need criminal penalties. People have to pay. He said, Every instance of a corporate governance break down is an instance of a CEO failure. He says that's where we have to go after the wrongdoers. I think he will get more questions on that because there is some question about what final legislation the House and Senate are going to agree on in terms of reigning all this in. And it could be a very interesting session, as yesterday was -- Leon.

HARRIS: All right. We will be watching it, and Kathleen Hays, we thank you very much for your time and your insight this morning.

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