Marketplace: News Archives

Wednesday, October 4, 2000
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It's Wednesday, the 4th of October. I'm David Brancaccio.

So here was the thrust of Jim Lehrer's question: If you were President, what would you do in the event of a sudden economic crisis? What if the stock market took a huge tumble, or a major financial institution failed?

Bush: "Well, it depends, obviously, but what I would do first and foremost is I would get in touch with the Federal Reserve Chairman, Allen Greenspan to find out all the facts and all the circumstances. I would have my Secretary of the Treasury be in touch with the financial centers, not only here but at home. I would make sure that key members of Congress were called in to discuss the gravity of the situation, and I would come up with a game plan to deal with it. That's what governors do. We end up being problem solvers."

Gore: "On the international financial crises that may come up, my friend Bob Rubin, the former Secretary of the Treasury is here tonight. He's a very good friend and advisor to me. I have had a chance to work with him and Alan Greenspan and others on the crisis following the collapse of the Mexican peso, when the Asian financial crisis raised the risk of world-wide recession that could affect our economy, and now, of course, the euro's value has been dropping but seems to be under control. But it started for me in the last eight years when I had the honor of casting the tie-breaking vote to end the old economic plan here at home and put into place a new economic plan that has helped us to make some progress toward 22 million new jobs and the greatest prosperity ever, but it's not good enough and my attitude is 'you ain't seen nothing yet'. We need to do more and better."

Competent responses, but which candidate got it right? What is the best way to deal with a sudden economic crisis? Is there a correct answer to Lehrer's question? If only the candidates could've used one of their lifelines.

Paul Krugman is a professor of economics at Princeton University

Krugman: "I guess one thing you can do is appoint a Treasury Secretary that people believe in, even if he doesn't have any power."

What is the President to do if a call comes in the middle of the workday and it is, God forbid, the Dow is down 1,500 points? Can the President, or should the President actually worry about the stock market day-to-day?

Krugman: "Well, he's not there to prop up stock prices but a real crash is bad stuff for the real economy. If you ask who really moves it, the answer is that it's really Alan Greenspan or his successor. But, it would be good to have a President who can in a knowledgeable way, get on the airwaves and say we have nothing to fear but fear itself."

And when the stock market did crash on Black Monday, October 19, 1987, Dan Hertzberg was covering the event for The Wall Street Journal.

Hertzberg: "We found in our reporting after the '87 crash that the Fed had talked to and leaned on the banks to be sure to provide the money that securities firms and market-makers needed so that they could complete the transactions they'd already made so they could pay for the stock. And, the calls were made and it was a success and at the same time, the Fed was providing more money in the system."

Any indication that the Fed was just doing this? Were there any consultations with the White House in '87?

Hertzberg: "I think they must have talked. I think in some ways the President is pretty limited in what they can do. There are obviously controls now that weren't in place then, such as the so-called 'circuit-breakers' which actually halt trading now."

These days Dan Hertzberg is deputy managing editor of the Wall Street Journal.

And here are some other Marketplace stories today. What do you think of when you hear this:

AT&T Ad: "A-T-and-T!"

If your Pavlovian response is "long distance," that's exactly what the company had in mind. But what if AT&T spins off this bread-and-butter business so it can focus on making money by pumping Internet data through its high-speed cables? It's a move reportedly under consideration, as Bob Moon explains:

Moon: "So what's the problem with AT&T's lucrative consumer long-distance business?"

Calabrese: "AT&T's investors want performance and they want it now."

Moon: "As Argus Research analyst Kevin Calabrese sees it, investors have no patience for a slow-growth business, even if the profit picture isn't all that bad."

Calabrese: "They made $8 billion in profits last year on 23 billion in revenue on long distance. There are a lot of companies out there that would look at that and say, 'Great, fantastic!.' AT&T looks at it and says, 'You know, our investors demand higher growth.'"

Moon: "That's a point Deloitte Research telecommunications analyst Dwight Allen agrees with. He suggests AT&T's long-distance business might be a victim of its own success. Allen says consumers think of AT&T as the premium service, and there isn't much growth in that."

Allen: "There are an awful lot of smaller companies out there now in today's world, offering no-frills cheap service. And it's tough to make headway against competition like that."

Moon: "The Wall Street Journal reports AT&T has even courted potential buyers, including Verizon Communications. But a purchase like that would have to win federal regulatory approval, and a spin-off could be easier. AT&T isn't the only company considering such a move. WorldCom is thinking about separating its consumer long-distance service, as well. I'm Bob Moon for Marketplace."

And Warner Brothers is expected to announce plans to close its flagship store full of logos and Bugs Bunnies on Fifth Avenue in New York City and scale back dozens of its other studio stores around the country. Warner isn't alone in rethinking its strategy on these theme stores that have become part of shopping mall life around the country. Marketplace's Michelle Brier reports.

Brier: "The Warner Brothers studio stores haven't been doing as well as the company would like and a plan to close or scale back 140 outlets was already in the works. But now there's word Warner is giving up its dazzling Fifth Avenue flagship as part of a massive downsizing plan. The move comes just months after Coca-Cola closed its Fifth Avenue theme store. Disney has closed shops in California and may be shuttering its prime New York shop, too. And Viacom ditched 15 Nickelodeon stores it found too costly. The trend seems to beg the question."

Bugs Bunny: "What's going on here?!"

Brier: "Retail leasing specialist Faith Hope-Consolo says theme retailing is fading and prime locations like Fifth Avenue will reflect that."

Hope-Consolo: "We've come into a terrific economy and the new retailers locating on the street are more of a luxury market. It's the consumer who has made the decision. The consumer now, on Fifth Avenue in New York or Michigan Avenue in Chicago or San Francisco, is saying, 'We want a different type of product.'"

Brier: "The hot economy has also pushed up commercial rents. Prime Fifth Avenue spots go for about $600 a square foot today, more than double the rates of 1993 when the Warner store first opened. Theme stores have faced increased competition from discounters like Wal-Mart as well, making it tougher to get top dollar for Bugs and Pooh Bears in the fancy locales. In New York, I'm Michelle Brier for Marketplace."

And that's the top of our news for Wednesday. Today the Dow Jones Industrial Average went up 64 points, that's about 0.66 percent. The Nasdaq gained 67 points or two percent.