Reverse Spin: Greenspan & Co. not afraid to take action

The “D” word just won’t go away.

Federal Reserve Board Chairman Alan Greenspan said last Tuesday that it might be necessary to cut interest rates as “insurance” against the possibility of deflation. The Fed’s next policy-setting meeting takes place June 24 and 25.

“It is too early to get any real fix on the American economy in the period ahead,” Mr. Greenspan reportedly told an International Monetary Conference central bankers’ panel.

Boy, is that an understatement. Economic data last week were all over the map.

On the positive side, orders for manufactured goods expanded last month following two monthly declines, while the May unemployment report was largely upbeat.

But a weekly tally of first-time filings for unemployment benefits showed a surprise jump, and factory orders slipped in April.

Investors threw caution to the wind, however, bidding stocks up strongly, with the Dow Jones Industrial Average above 9000 for the first time since last summer.

Compute this

* Big Blue may be in big trouble.

International Business Machines Corp. of Armonk, N.Y., last Monday said it was being investigated by the Securities and Exchange Commission, which is looking into how the company booked its revenue in 2000 and 2001.

IBM, the world’s biggest computer maker, said the SEC is examining sales from customer transactions, adding that it thinks the probe stems from a separate investigation of a customer of a company unit that makes point-of-sale products for retailers.

“This is big news because it goes back to the old accounting scandals that have shaken investor confidence, starting with Enron,” Burton Schlichter, a senior market analyst with Lind-Waldock & Co. in Chicago, told Reuters.

A fine mess

* This seems to be one mess domestic diva Martha Stewart can’t clean up.

Ms. Stewart was indicted last Wednesday on federal charges that she lied to investigators who were probing her December 2001 sale of New York-based ImClone Systems Inc. stock. She also resigned as chairman and chief executive of Martha Stewart Living Omnimedia Inc. in New York.

Last Thursday, Ms. Stewart penned a letter to the public that appeared on her new website, marthatalks.com.

In the letter, she proclaimed her innocence, said she intends to clear her name. She thanked her friends for their “extraordinary support during the past year.”

Hot on the trail

* Self-regulatory organizations: Brace yourselves. The SEC is breathing down your necks.

Agency Chairman William H. Donaldson announced Thursday that the SEC will look into the SRO structure and find out why it failed to prevent the recent accounting and brokerage scandals.

The SROs include the New York Stock Exchange, which has come under fire of late for failing to reform itself.

“We need to take – and this is a big one – a more comprehensive look at market structure, and we are beginning this project without delay,” Mr. Donaldson said in a speech to the New York Financial Writers Association Thursday evening.

Still, the country’s top security regulator defended the concept of SROs, saying it was one of the “genius” ideas to emerge from the stock market crash of 1929.

No word on what Mr. Donaldson thinks is the reason the geniuses who run the SROs seemed to be asleep at the switch during the past couple of years.

Closing Quote

“Why put a loaded gun in someone’s hand and say ‘Play Russian roulette’?”

John McGovern, chief compliance officer of Royal Alliance Associates Inc. in New York, on the problem of computing break-point discounts for mutual funds.

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