Magazine says Greenspan feared U.S. stocks fall
WASHINGTON, Aug 11 (Reuters) - Federal Reserve Chairman Alan Greenspan has expressed fears the U.S. economy could be damaged if stock prices fell dramatically in the same way as they did in Japan in the late 1980s, the New Yorker magazine said.
Referring to a meeting nearly two months ago between private economists and the Fed board, the magazine said the participants discussed the parallels between the stock market crash of 1929 and the more recent stock market crash in Japan.
''Greenspan is very worried about a repeat of Tokyo in the eighties, and he should be worried,'' Professor Jeremy Siegel of Wharton business school, who attended the meeting, was quoted in the most recent issue of the magazine as saying.
Siegel told Reuters the meeting was on June 15 and that it lasted for several hours including lunch. The periodic meeting is held at the Fed once or twice a year.
He said there was general agreement that bubbles in asset prices, as experienced by Japan in the 1980s, were harmful for the economy but that the United States was not in that situation yet.
''I don't think we're anywhere near there,'' Siegel said, noting that property prices were not generally inflated as they had been in Japan at the end of the 1980s.
The meeting also discussed the issue of whether the Federal Reserve should raise interest rates to cool an overheating stock market.
Siegel said the economists and consultants invited to the meeting generally believed the Fed should refrain from using higher interest rates as this was ''too blunt an instrument.''
A Fed spokeswoman declined to comment on the magazine report or the meeting, citing the central bank's policy of not disclosing conversations in private meetings.
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