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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: calgal who wrote (155465)	6/24/2001 1:29:23 PM
From: calgal	Respond to of 769667

Coin toss at the Fed Street can't decide between 25 and 50 basis point cuts By Rex Nutting, CBS.MarketWatch.com Last Update: 6:05 PM ET June 22, 2001 WASHINGTON (CBS.MW) - The Federal Open Market Committee will have to go it alone when it meets to consider further interest rates cuts on Tuesday and Wednesday. FRONT PAGE NEWS Is help from the Fed on the way? Judge says California power refunds likely Wireless carriers split on airwave case Qwest attack on analyst casts a chill Market news and more! Sign up to receive FREE email newsletters Get the latest news 24 hours a day from our 100-person news team. For a change, the market isn't telling the FOMC what to do. An announcement of the year's sixth cut in overnight interest rates is expected on Wednesday at about 2:15 p.m. Eastern. Typically, the financial markets and market analysts reach a consensus about what the Fed is likely to do a week or two ahead of the central bank's policy meetings. And usually, the consensus is right about what the FOMC ultimately does. This time, it's different. Everybody and their dog expect a rate cut, but there's no agreement on the size of the cut. In our weekly poll, 11 economists are forecasting a 25-basis-point cut in the Federal funds rate to 3.75 percent. And 11 economists are forecasting a 50-basis-point cut to 3.5 percent. Financial markets are no more certain: The Fed funds futures market is pricing a 45 percent chance of a 50-basis point cut. The case for 25 Those who think the Fed will slow from its furious hacking away at interest rates say the economy is about to recover. After all, they say, 250 basis points of easing and $60 billion in tax cuts should give the economy a nice boost. "If we weren't going to get the tax rebate, they'd probably cut 50," said Gary Thayer, chief economist at A.G. Edwards. "The tax rates are going to be a boost to the economy." "Plus, gas prices are falling," Thayer said. "Most people are more sensitive to gas prices than they are to interest rates." "We lean towards a quarter point move, as a compromise between doves focused on worrisome economic data, and a few hawks who point to the monetary and fiscal easing already in the pipeline," said Avery Shenfeld, chief economist at CIBC World Markets. "The conditions for recovery are falling into place," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, who argues that the Fed should stop now. Still, Shepherdson admits "in the short-term, however, the news will remain bleak." There's really no evidence of a recovery in any of the recent economic data, but several advance indicators are looking better: Weekly jobless claims may have plateaued, the index of leading indicators has risen two months in a row, and expectations for a recovery later in the year are improving among both consumers and businesses. Those in the quarter-point camp also say Fed Chairman Alan Greenspan won't be able to get another 50-basis-point cut approved by the FOMC, where some members are increasingly worried about a new round of inflation breaking out. Finally, those who forecast a more modest cut say the Fed needs to preserve its ammo in case it's needed later. With the Fed funds rate at 4 percent, the Fed is running out of rate cuts. The case for 50 "They really have nothing to lose" by cutting another half point, said Wayne Ayers, chief economist at FleetBoston. "They'll probably take out an insurance policy." Ayers and others who expect another aggressive move say the industrial economy is still weak and showing no signs of real improvement. Industrial production is falling and unemployment is rising. See video interview with Dain Rauscher strategist Phil Dow "It seems premature to be declaring victory," said Stephen Slifer, chief economist at Lehman Brothers. Slifer said Greenspan has been focusing on the bad news coming from the corporate sector and there's been no improvement in earnings expectations yet. "We won't see a decisive turnaround in technology until late this year or next year," Ayers said. But in the meantime, the Fed can "buy some time" by "putting a floor under consumer confidence by putting a floor under the equity markets." The problem the Fed faces is tricky. It's trying to stimulate demand to allow businesses to work down their inventories enough so they'll bring back production workers to make new things. Unfortunately, "the unwinding of excess inventory and the hangover from the investment boom are impervious to short rates," Shepherdson said. The Fed could lower rates to zero and people still wouldn't buy the tech equipment they just don't need anymore, Ayers said. Greenspan might figure that cutting rates by just a quarter-percentage point would be taken by the markets as a sign that the rate cutting is over or nearly over. But Greenspan doesn't really know if one or two or three or more cuts will be needed, so how would he know when to start slowing the cuts? In fact, Slifer points out, the Fed rarely slows down before stopping. In 1995 and 2000, the last rate hikes were 50-basis-point moves. "Like the rest of us, the Fed is monitoring the economy and reacting to the news as it develops," Slifer said. Irwin Kellner, chief economist for CBS.MarketWatch.com and the Weller professor of economics at Hofstra University, argues in his column that Greenspan's worries about bad loans in the banking sector are a strong argument for even more cuts. Kellner's now calling for a 3 percent Fed funds rate in December. The data None of the economic data will make any difference in this week's debate. Still, some of the numbers will be closely watched. The biggest numbers are probably the May durable goods orders and June consumer confidence. Economists expect new orders to sink another 0.2 percent in May after plunging 5 percent in April. Orders for capital goods have fallen 10 percent so far this year, with no end in sight for key industries like telecommunications and semiconductors. The report will be released Tuesday at 8:30 a.m. The Conference Board's consumer confidence index will be released at 10 a.m. on Tuesday. Consumer optimism is a key to keeping the economy on an even keel. Economists expect confidence to fall slightly to 114.6 in June from 115.5 in May. The other data include the home sales reports. Existing home sales are expected to fall to 5.16 million while new home sales are expected to rise to 902,000 from 894,000. Finally, the Commerce Department will give its third estimate of first-quarter growth. Economists expect growth in the quarter to be revised lower to 1.1 percent from 1.3 percent originally based on the revised to the trade numbers.

To: calgal who wrote (155465)	6/24/2001 1:31:53 PM
From: calgal	Read Replies (2) \| Respond to of 769667

Employer health plan liability debated Daschle repeats call to finish patients' rights bill By William L. Watts, CBS.MarketWatch.com Last Update: 3:41 PM ET June 22, 2001 WASHINGTON (CBS.MW) - The Senate continued work on a patients' rights bill Friday, debating a Republican-sponsored amendment to shield employers from lawsuits by patients. FRONT PAGE NEWS Is help from the Fed on the way? Judge says California power refunds likely Wireless carriers split on airwave case Qwest attack on analyst casts a chill Market news and more! Sign up to receive FREE email newsletters Get the latest news 24 hours a day from our 100-person news team. The amendment would essentially eliminate all liability for employers. Without the measure, numerous employers would likely feel they have no choice but to drop health coverage outright for possibly millions of employees, Republicans said. "They will give employees a certain amount of money and say find health care the best you can," predicted Sen. Kay Bailey Hutchison, R-Texas. Democrats contend that the patients' rights bill under consideration offers significant protections for employers, leaving them liable only in cases where they direct health care providers not to provide needed care. Republicans contend the bill is riddled with loopholes. Top Democrats said they would be prepared to support a less sweeping measure designed to limit employer liability sponsored by Sen. Olympia Snow, R-Me. The Senate adjourned Friday afternoon without voting on the measure. Earlier, the chamber voted 89-1 in favor of an amendment offered by Sen. John McCain, R-Ariz., guaranteeing breast cancer patients the right to participate in clinical trials and access to specialty care. The Senate will return to session Monday afternoon, with further votes set to take place on Tuesday. Democrats reiterated a threat to cancel the weeklong Independence Day recess unless a final bill is approved by June 30. Sticking point Liability concerns remain the key sticking point for patients' rights legislation. President Bush and most Republicans favor a different bill drafted by Sens. Bill Frist, R-Tenn., John Breaux, D-La., and Jim Jeffords, I-Vt. The bill under consideration, which was drafted by Sens. Edward Kennedy, D-Mass., John Edwards, D-N.C., and McCain would allow patients to sue health plans in state court in cases where denied, delayed or substandard care resulted significant harm. Bush favors a bill written by Sens. Bill Frist, R-Tenn., John Breaux, D-La., and Jim Jeffords, I-Vt., which would largely prevent patients from suing in state court, where potential damage awards are often unlimited. Instead, patients would be able to sue in state court after exhausting an independent review process. Punitive damage awards would be capped at $500,000. Bush on Thursday issue a written warning to Senate Democrats, threatening to veto patients' rights legislation unless significant changes are made to protect health plans from liability. Senate Democratic leaders said the threat was counterproductive. "I thought that veto letter sounded like it was written by the HMOs," Senate Majority Leader Tom Daschle, D-S.D., told reporters Friday. "That isn't what we need; we don't need more confrontation. We need more cooperation and consideration of what opportunities there are for real compromise here." Bush contends the Kennedy-Edwards McCain bill would drive up significantly the cost of insurance and potentially leave millions of workers without health coverage. Democrats argue that the Bush approach, by limiting liability, would leave HMOs free to flaunt other reforms supported by both Republicans and Democrats and extremely popular with voters. Both bills are designed to guarantee patient access to emergency treatment, streamline access to specialists and pediatricians and otherwise improve patient satisfaction with health plans. Democrats were heartened Thursday night after defeating a GOP-sponsored amendment that would have accelerated scheduled tax credits for health insurance purchases made by self-employed persons. The amendment was defeated on a 52-45 vote, with Democrats joined by Republicans McCain and Lincoln Chafee, R-R.I. Democrats said the amendment was a bid to derail the bill because it conflicted with constitutional requirements for tax measures to originate in the House of Representatives. The defeat of the tax-related amendment suggests Democrats can muster support needed to pass the Kennedy-Edwards-McCain bill with few changes, said Roberta Walter Goodman, an analyst at Merrill Lynch. That said, there probably isn't enough support to override a presidential veto, which will force Democrats to compromise, she said. Daschle was non-committal about how much ground Democrats would be willing to give. "If we have a strong vote, I think that ... going into the conference, it'll be a very good negotiating position. If we just eke out a victory, it'll mean something else," he said. Earlier, the chamber passed an amendment 89-1 sponsored by Sen. John McCain, R-Ariz., which would guarantee patients participating in health maintenance organization plans the right to participate in clinical trials for cancer drugs. cbs.marketwatch.com