Marketplace: News Archives

Wednesday, November 15, 2000
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It's Wednesday, November 15. I'm David Brown sitting in for David Brancaccio.

No surprises from the folks who make monetary policy today. The Federal Reserve's Open Market Committee left interest rates unchanged which means the key Federal Funds rate, stays at 6.5 percent or, right where its been since May. But even as policymakers left rates alone, they warned inflation still looms on the horizon - not hard to read between the lines there - that obviously leaves the door open to a rate hike in the future. But as Marketplace's Michelle Brier reports from New York there's another factor that could impact the Fed's next step.

Brier: "The federal reserve's policy making group left interest rates alone today but did not rule a future rate hike. While investors showed their disappointment by selling off what had been an all day stock market rally, economist Ian Shepardson was not surprised by the Fed's caution."

Shepardson: "I think they are looking at the economy slowing, but not slowing enough to be absolutely certain all risk of inflation has passed. After all, the unemployment rate is still at a 30 year low of just 4 percent and some of the latest labor numbers show there may be pressure on pay. As long as that remains, the fed is a bit nervous."

Brier: "The Fed's announcement was not entirely without hope for those wanting lower rates, says Jim Glassman, senior economist at chase securities."

Glassman: "Its saying, look, there's been a softening in business and household demand and tighter conditions in the financial markets have made it more difficult for companies to raise financing. That might mean in the coming quarters we might have sub-par growth, growth below potential. If that happened that would justify a change in their view of the risks."

Brier: "Some economists think there's another scenario that could prompt a rate cut and that's a protracted election court fight leading to big losses in the stock market. Again, Ian Shepardson."

Shepardson: "A weaker stock market would probably mean weaker consumer confidence and perhaps a not so great season for retailers over the holidays. Remember we are coming up to an important season for a big chunk of the nation companies in retail and the last thing they want is election uncertainty depressing confidence and hurting sales. If that happens, the fed might think heading into the new year, we need to ease."

Brier: "Jim Glassman disagrees."

Glassman: "I think the fed would be reluctant to take action on what is going to be a short lived uncertainty. By January 20 we're gonna have a president and the problem is, if the fed changes policy now it has a lasting effect. By the time the Fed's rate cut kicked in, we'd have a president, we'd be long gone down the road."

Brier: "The federal reserve's next meeting is December 19. In New York, I'm Michelle Brier for Marketplace."

Sometimes big accounting firms do more than certify a company's books; sometimes they sell that same client a package of consulting services. Sound like some conflict of interest issues might be present? Well, today the Securities and Exchange Commission unanimously adopted rules limiting the amount of consulting independent auditors may undertake and, as Marketplace's John Dimsdale reports from Washington, it ends a protracted battle between the government and the accounting industry.

Dimsdale: "In the global economy, the big accounting firms like Pricewaterhousecoopers and Deloitt & Touche are earning more money from their business consulting services than from accounting. But that means, when it comes time for checking up on the books, the folks with the green eye shades can end up auditing their own work. Today, at a standing room only meeting of the Securities and Exchange Commission, the SEC's chief accountant Lynn Turner told Commissioners the growth in outside consulting work threatens auditors' independence."

Turner: "If the public confidence in this country's auditors is ever lost, we risk nothing less than public confidence in America's markets."

Dimsdale: "Despite industry opposition to restrictions on outside consulting, the four-member Commission unanimously adopted a compromise set of limits that also require disclosure of non-auditing ties between companies and their outside accountants. While the final language is still not out, Alan Anderson with the American Institute of Certified Public Accountants was pleased after today's vote."

Anderson: "At the highest level it certainly sounds like all our concerns have been addressed and the negotiation working with the SEC has been a tremendous effort and Chairman Levitt did a great job."

Dimsdale: "Consumer's Union criticized the SEC for "watering down" the auditor independence rules, but Commissioners and people in the industry called them the crowning achievement for chairman Arthur Levitt, the longest serving SEC chairman in history who is likely to leave when the next administration moves in. In Washington, I'm John Dimsdale for Marketplace."

A report issued more than a year ago found that medical errors cause as many as 98,000 deaths each year. There's been extensive analysis of causes, new standards announced, legislation proposed and even a Rose Garden press event all pushing for improvements. Today, though, the business community weighed in, putting its financial clout into something called the Leapfrog Group. Marketplace's Helen Palmer has more from the Health Desk.

Palmer: "The Leapfrog group has a website - with a cute little image."

Delbanco: "The first thing you'll see is a lilypad, with a line that bounces right off it."

Palmer: "The group's executive director Suzanne Delbanco says that graphic sums up the aims of some 60 corporate leaders to make huge leaps in patient safety."

Delbanco: "The founding frogs, as we call them, are the heads of health benefits at some of our nation's largest employers."

Palmer: "Now these founding frogs are benefits bosses at - for example - GTE and Boeing and Coors and Honeywell and Motorola. They plan practical hops to avoid mistakes - insisting doctors use computers to order drugs, ensuring complex surgery is done by hospitals certified as the best, and above all, educating patients."

Berwick: "I see the Leapfrog group as potentially a great motivator of change."

Palmer: "Dr Donald Berwick, President of the Institute for Health Care Improvement says employers really have the financial clout to force the health care system to improve - and their initiative is also welcomed by the American Hospital Association. But the AHA's Carmela Coyle has some caveats - especially to introducing computerized systems for doctors' drug orders."

Coyle: "This is not a technology you can simply buy off the shelf. In fact, it is a very significant investment and it's a technology that is still quite new."

Palmer: "Such investment would be hard for many hospitals, reeling from federal cuts, she says, though it's vital that everyone involved in medical care push for better quality. From the Health Desk at WGBH Boston, I'm Helen Palmer."

Wall Street finished sunny side up with the Dow Jones Industrials 0.25 percent higher, the Nasdaq composite up almost 1 percent. Details when we do the numbers.