FW: Very Interesting Article from The Washington Post

This is an interesting article.

Gary

-----Original Message-----
From: Greene, John
Sent: Friday, September 14, 2001 7:25 AM
To: Hickerson, Gary
Subject: FW: Very Interesting Article from The Washington Post

FYI - I am sure we already have enough of our own stocks on the books but this may be worth relaying to Greg, et al.

-----Original Message-----
From: Towarek, Michael
Sent: Friday, September 14, 2001 11:44 AM
To: Greene, John
Subject: FW: Very Interesting Article from The Washington Post

<
< Stocks to Trade Monday With Special Rule
< Big Firms Can Buy Shares Back to Halt Plunge
< By Kathleen Day and John M. Berry
< Washington Post Staff Writers
< Friday, September 14, 2001; Page E01
< In advance of the planned reopening of U.S. stock markets on Monday, major
< securities firms and corporations have reached an extraordinary agreement
< to prop up prices by buying shares if a flood of sell orders threatens to
< send the markets into a free fall, industry and government sources said
< yesterday.
< Federal securities regulators have made it clear they will permit these
< and other market practices that might raise legal questions in ordinary
< circumstances, the sources said. Securities and Exchange Commission
< Chairman Harvey Pitt alluded to the informal accord yesterday when he said
< the agency would make it as easy as possible for companies to buy back
< their own shares and would open a hot line for brokers and companies with
< questions about proper trading practices.
< The government's green light was signaled late yesterday after a major
< firm approached the SEC requesting that the rules concerning share
< buybacks be relaxed temporarily because of widespread fears of an investor
< panic in reaction to Tuesday's terrorist attacks, Wall Street sources
< said.
< "We intend to make it easy for public corporations to repurchase their
< shares," Pitt said at a news conference with New York Stock Exchange
< Chairman Richard A. Grasso and Nasdaq Chairman Harwick Simmons. But Pitt
< also made it clear the agency will be making sure investors don't get
< gouged, which securities lawyers interpreted to mean that the SEC will
< allow corporate buybacks only to the extent that they don't hurt investors
< by unfairly propping up or depressing individual company prices.
< The SEC chief said he will announce today a number of steps "to facilitate
< an orderly market." He hinted strongly that short selling -- a practice in
< which investors bet that stock prices will fall -- will be restricted.
< "With respect to short selling, the goal of all of us is to have a market
< that most closely approximates the normal trading environment," he said.
< "As a result of that, you can tell in which direction we will probably be
< leaning."
< The plan to resume stock trading on Monday after a four-day halt -- the
< longest since the Great Depression -- depends on a test of market systems
< scheduled for Saturday, the three men said.
< Securities industry executives interviewed yesterday said the Monday
< target is attainable but privately voiced concern about whether it will be
< met, warning that power outages, disrupted phone service and structural
< damage to buildings are proving to be more daunting than expected.
< While industry and government officials have struggled for days with the
< technical obstacles to reopening the U.S. markets -- the largest in the
< world -- the agreement yesterday reflected their concerns about the
< potential psychological hurdles ahead.
< "As the market opens on Monday, no one knows what will happen," said an
< executive of a major securities firm. "But people have been made aware
< that they're looking at facilitating the ability of companies to purchase
< shares if the market gets wacky."
< Pitt would not disclose details about how stock buyback rules will be
< eased, but SEC steps could include relaxing rules about the volume of
< stock that can be purchased and allowing such trades at the beginning and
< end of trading sessions, securities industry experts said.
< Sources said the SEC's decision is similar to steps the agency took to
< restore stability and confidence in the aftermath of the 1987 market
< crash.
< Before the SEC was created in the early 1930s, powerful Wall Street
< figures tried on occasion to prop up the market in times of distress. J.P.
< Morgan stopped a panic in 1907 that way. In October 1929, Richard Whitney,
< an exchange official, became a national hero by walking onto the jittery
< trading floor and placing a bold order to buy U.S. Steel above its price
< at the time. The move, backed by a group of bankers, buoyed hopes and
< prices -- but only for two days. Then the market crashed.
< Yesterday, the Federal Reserve, which pumped a record $38 billion into the
< U.S. banking system on Wednesday, put in another $70 billion in the
< afternoon to ensure that brokerage firms, investment banks and other
< companies providing financial services have no trouble financing loans or
< other types of investment activity.
< In another effort to shore up market confidence, Treasury Secretary Paul
< H. O'Neill issued a statement before television cameras taking sharp issue
< with the concerns, voiced by many private economists, that the terrorist
< assault will tip the slowing U.S. economy into a recession by destroying
< consumer confidence.
< "The destruction in New York City is horrible and detestable. At the same
< time, America's dynamic economy is not located in any one place," O'Neill
< said. "Innovation and productivity are found in every factory and farm,
< every laboratory, every financial institution, every small business and
< every home office across America. That spirit cannot be destroyed."
< Although the tragedy will cause some supply disruptions and transportation
< stoppages, "these effects will be transitory," O'Neill said. "The
< prospects for a rebound in the U.S. economy [later this year] remain
< unchanged."
< Helping to bolster optimism was the performance of markets in Europe,
< which continued to claw their way back from the steep drops Tuesday that
< followed the attacks on the World Trade Center and Pentagon. Germany's DAX
< index rose 1.32 percent, and London share prices were up 1.26 percent,
< though France's CAC 40 index dipped slightly. Japan's Nikkei index eked
< out a gain of 0.03 percent, and Hong Kong's Hang Seng index rose 0.8
< percent.
< But two pieces of news yesterday underscored how shaky the U.S. economy
< was even before this week's events.
< A monthly survey of consumer sentiment dropped to an 8 1/2-year low in the
< first part of this month. The survey, compiled by the University of
< Michigan, provided a reading of 83.6, down from 91.5 the month before, and
< by far the lowest since sentiment began falling late last year.
< Significantly, both consumers' assessment of the state of the economy and
< their expectations about it six months from now deteriorated noticeably.
< Analysts at the university said the "early September loss was due to
< heightened concerns about future prospects for the national economy as
< well as more pessimistic assessments by consumers of their own financial
< situation." Given the shock of the terrorist attacks, "the likelihood that
< the economic downturn could turn into a full-fledged recession has grown
< substantially."
< Meanwhile, the Labor Department said the number of initial claims for
< state unemployment benefits jumped to 431,000 last week, well above the
< 400,000 level that had been reported for several weeks. A number of
< analysts said the increase was a sign that the labor market is continuing
< to deteriorate and that joblessness is certain to continue rising.
< In the U.S. government bond market, where trading resumed yesterday after
< a two-day hiatus, yields on some Treasury bills plummeted more than
< four-tenths of a percentage point. Yields on six-month bills tumbled to
< 2.72 percent, the lowest level in decades.
< Analysts said the sharp drop was the result of several factors, including
< the "flight to quality" impulse that often materializes during crises as
< investors move money into U.S. government securities, which are viewed as
< the safest in the world. Strong demand for bonds causes yields to drop as
< investor become more willing to hold them regardless of their yields.
< Yields were also depressed by expectations of many investors and analysts
< that the Fed will cut interest rates no later than its next policymaking
< session on Oct. 2. That would be the eighth rate cut since the beginning
< of the year.
< SEC officials did an about-face from Wednesday, when a spokesman said the
< agency didn't know where investors having trouble contacting brokers
< should go to learn about their accounts and money. Pitt said that in
< addition to the hot line for financial institutions, the agency would
< today open another one for investors who have questions about their
< accounts. The numbers will be posted on the SEC's Web site (www.sec.gov).
< The National Association of Securities Dealers, the parent company of
< Nasdaq and the American Stock Exchange, said it will post on its Web site
< today (www.nasdr.com) information about where investors with questions can
< go.
< A Nasdaq spokesman also had to backtrack yesterday from a statement
< Simmons made Wednesday, apparently in error, that 19 of the 32 securities
< firms with offices in the World Trade Center had not been heard from. The
< spokesman said in fact Nasdaq had heard from 25 of the 32. It hadn't tried
< to contact the other seven. All 25 have said they can be up and running,
< at least in some capacity, the spokesman said.
< Staff writers Paul Blustein and Glenn Kessler in Washington and Carol
< Vinzant in New York contributed to this report.
<