MEDIA WATCH: When Alan Greenspan talks, the entire world listens

Remember the old commercial that said, 'When E.F. Hutton talks, people listen'? Well, maybe the Federal Reserve Board needs to adapt that slogan for its influential chairman, Alan Greenspan. On January 3, Greenspan surprised the entire nation by reducing interest rates by half a percentage point weeks before their next scheduled meeting. In a matter of minutes following the news, the stock markets registered mammoth gains, with the Dow finishing the day up nearly 300 points, while the NASDAQ registered its biggest point gain in history, up nearly 325 points.

Remember the old commercial that said, 'When E.F. Hutton talks, people listen'? Well, maybe the Federal Reserve Board needs to adapt that slogan for its influential chairman, Alan Greenspan. On January 3, Greenspan surprised the entire nation by reducing interest rates by half a percentage point weeks before their next scheduled meeting. In a matter of minutes following the news, the stock markets registered mammoth gains, with the Dow finishing the day up nearly 300 points, while the NASDAQ registered its biggest point gain in history, up nearly 325 points.

Remember the old commercial that said, 'When E.F. Hutton talks, people listen'? Well, maybe the Federal Reserve Board needs to adapt that slogan for its influential chairman, Alan Greenspan. On January 3, Greenspan surprised the entire nation by reducing interest rates by half a percentage point weeks before their next scheduled meeting. In a matter of minutes following the news, the stock markets registered mammoth gains, with the Dow finishing the day up nearly 300 points, while the NASDAQ registered its biggest point gain in history, up nearly 325 points.

CARMA sifted through media coverage to analyze the broader significance of the rate cut. Reaction most often focused on the timing of the move, but there were different interpretations as to why the timing was so important. Everyone agreed that the inter-meeting session of the Federal Open Market Committee was rare. However, some viewed the rate cut as a ratification of the Bush-Cheney team's recent warnings about the state of the economy. CNNfn (January 3) termed the rate cut 'a wonderful public relations gift' for Bush in light of the in-progress meeting he was having with leading business executives when the cut was announced.

Meanwhile, others suggested the cut was Greenspan's way of showing Bush who's really in charge of the economy.

A number of articles viewed the rate cut in the context of the nation's current political environment - specifically the debate about tax cut initiatives. An editorial from The New York Times (January 4) argued that Greenspan's move would actually decrease support for Bush's dollars 1.3 trillion tax cut: 'The nimble Fed can do far more to combat the economic slowdown through monetary policy than the incoming Bush administration can hope to achieve through its enormous proposed tax cut.'

Other reports identified the rate cut as a bold and sudden move from Greenspan, who is legendary for his incremental measures. Reading between the lines, pessimists suggested that the state of the economy must be far worse off than Greenspan originally thought for him to make such a dramatic move. Greenspan's former vice chairman Alan Blinder told The Wall Street Journal (January 4), 'This says to me that Alan Greenspan is considerably - not just a little, but considerably - more worried about the health of the economy than the consensus forecasts.'

Reports emphasized that the economy can't reverse course on a dime, like the daily fluctuations of the stock markets can. These articles stressed that it will take between six to nine months for the impact of the rate change to be shown in the economy. Until then, the markets are likely to fall further, after the initial euphoria of the rate cut fades and there's further news of disappointing corporate earnings.

With Greenspan indicating he's willing to cut rates further, there were also projections as to how far the Fed would go. Estimates ranged from another half a percentage point to one and a half points.

No doubt, the nation will continue to watch like a hawk for further news regarding Greenspan's efforts to save the economy. When the media calls you 'the most powerful guy in the country' (FOX News Network, January 3), people listen.



- Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.



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