Delivering his twice-a-year report on Fed policy to Congress, Greenspan did not signal that a rate increase is imminent. Indeed, he also left open the possibility that if the global economic crisis should suddenly re-ignite, the Fed would respond wi
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"We remain vulnerable to rapidly changing conditions overseas, which, as we all saw last summer, can be transmitted to U.S. markets quickly and dramatically," Greenspan said.
But referring to the three interest rate cuts the Fed made over a span of seven weeks last year, Greenspan said the central bank must address "whether the full extent of the policy easings undertaken last fall ... remains appropriate."
That remark was seen as a signal that the Fed is having second thoughts about the third rate cut, which moved the federal funds rate - the interest that banks charge each other - down to 4.75 percent.
Greenspan called the economy's growth rate in the fourth quarter "torrid." He also repeated worries he expressed last month about whether the stock market's return to record levels is justified in light of the weakness in corporate earnings.
"The Fed probably regrets in hindsight that the third rate cut was made," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "Chairman Greenspan is telling us that the Fed hopes the economy slows on its own, but he is not going to wait forever for that to occur."
Wall Street investors also had a pessimistic reading of Greenspan's words. Bond prices dropped sharply on fears of future Fed rate increases, with falling demand pushing the yield on Treasury's benchmark 30-year bond up to 5.43 percent, compared to 5.35 percent on Monday. Stock prices edged lower as well. The Dow Jones industrial average finished the day down 8.26 at 9,544.42.
"Give us the flexibility, we'll get the results," Michigan Gov. John Engler told senators on a committee overseeing federal education programs.
Engler urged senators to give states lump sum payments for education, called block grants, as they did when Congress overhauled the welfare law.
"Block grant federal funds to the states and hold us accountable," Engler said in testifying before the Senate Committee on Health, Education, Labor and Pensions.
New Jersey Gov. Christine Todd Whitman added, "Give us more flexibility so that federal programs and dollars compliment... our state reforms."
Engler also called on federal lawmakers to streamline the 39 federal agencies, boards and commissions that administer more than 760 education programs because there are "too many dollars paying for bureaucracy, micromanagement and red tape."
Sen. Jim Jeffords (R-Vt.), the committee's chair, said he wanted to work with the governors in reauthorizing a five-year act that covers much of the government spending for schools from kindergarten through high school. But he said many school students were lagging behind and schools need to improve.
"We all have to take some responsibility for it. I don't think it's just the federal government's inability to do things," Jeffords said.
The federal government accounts for only about 7 percent of Michigan's total spending on education, Engler said. State and local investment next year in public education from kindergarten through high school will be $12.5 billion in Michigan, Engler said. In comparison, the state will receive $947 million from the federal government.
On average, other states also get about 7 percent of school spending from the federal government, leaving the bulk of the responsibility for education to state and local government, Voinovich said.
"For Congress to start mandating a lot of things in education is like the tail wagging the dog," Voinovich said.
Short of a full block grant to the states, Engler said he supported expanding an option that allows states to waive some federal education requirements. Michigan is one of a dozen states that already has such a waiver under a pilot program.
A large chunk of the federal funds in the primary and secondary education act up for reauthorization this year is targeted to educating poor children. Sen. Edward Kennedy (D-Mass.) told governors that if states were given more flexibility, he would want to know the specifics of how governors would help the poorer students.
Earlier in the week, many governors had agreed that Washington was failing in its responsibilities when it comes to the rising costs of special education programs.
The federal law mandating school districts to pay the costs of educating students with learning disabilities was passed in 1975 and the federal government agreed to pick up about 40 percent of those costs. In the last decade, in part because of litigation, the costs for special needs education have risen steeply.
Governors complain the federal government has only picked up about 12 percent of that tab.
Engler said in an interview on Monday that special education budgets were putting "an increasing demand" on the general education budget and governors were seeking some legislative relief.
Starting today, Congress begins a review process expected to dramatically alter - or simply scrap - the Watergate-era law that created the powerful prosecutorial post. The two political parties share almost universal disdain for the statute that set that probe and others in motion.
The problem, say the critics, is that the investigations tend to last too long, cost too much and stir up too much political fury.
A flurry of reform proposals are circulating on Capitol Hill to reign in future independent counsels through budgetary restrictions, time limits and a reduction in the number of targeted officials. But as likely as fine-tuning is the outright death of the statute.
Abdullah Ocalan's Turkish attorney was barred from the hearing or conferring with his client, who has been under interrogation for a week without seeing a lawyer.
Ocalan leads the Kurdistan Workers Party or PKK, a rebel army that has waged a nearly 15-year fight for Kurdish autonomy in Turkey's rugged, impoverished southeast.
The conflict has claimed an estimated 37,000 lives, with the toll growing daily. Yesterday, the government reported the deaths of 14 rebels in clashes with Turkish troops in the mountains.
Yesterday's hearing was closed to the press and public. Its outcome was reported by the semi-official Anatolia news agency, which cited statements from the judge and prosecutors.
Turkey has insisted that Ocalan's trial in a security court with military judges will be fair. It has also warned against any outside interference, repeating yesterday that foreign monitors will not be allowed to attend.
A raging blizzard prevented Austrian army rescue teams with search dogs from reaching the disaster scene in the town of Galtuer, just north of the Swiss border, leaving the grim task of extracting the dead and injured to stunned survivors in the town sheltering about 2,000 tourists.
"You can't find a single person at home in this village now - they are all fighting to reach those still alive at the accident site," a spokesperson for the Austrian Tourist Association said by telephone.
By nightfall, the bodies of seven victims had been recovered and 20 others were rescued alive, although several had suffered life-threatening injuries, said Paul Woell, emergency services spokesperson for the region that includes Galtuer.
02-24-99
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