Greenspan savages 'greed'

AT 76 years of age, it might have been thought that Alan Greenspan, the Federal Reserve chairman, had few new tricks up his sleeve. But the maestro demonstrated before the Senate that he has not quite lost his touch, even if his words of comfort failed to turn sentiment on Wall Street immediately.

The most important thing the Fed chairman had to say was that the Fed has no early intention of lifting American interest rates from the present 1.75%. Until the 'strong fundamentals start to show through more fully', rates will be held where they are. Market expectations of US rates have changed rapidly in recent weeks as equity markets went into sharp reverse.

Forward contracts were predicting 3.4% in the US by year-end. Now it is widely expected that the present 1.75% rate will see 2002 out.

This is critical because the last thing needed during a stock market-crisis is a credit crunch. Easy money is the solution to slump, a lesson learned the hard way during the Great Crash and reaffirmed by events in Japan in the early 1990s when the Bank of Japan's efforts to tighten policy prolonged the downturn after the share and property bubble burst.

Greenspan also ventured into areas outside the Fed's purview. There was strong criticism for the 'infectious greed' that gripped Wall Street in recent years. Moreover, he confessed he has changed his mind on self-regulation of the auditing profession and supported the Senate's move to create a Federal agency to watch over accountants.

Normally, the Federal Reserve says nothing on the exchange rate, leaving this to the US Treasury. Greenspan clearly felt he could help here, too, given the mixed signals that have come from Paul O'Neill, the Treasury Secretary.

His message essentially was that those who seek to profit in the foreign exchanges by taking positions against the dollar are dicing with death. He waved 'a flag of caution' regarding those still forecasting a further decline in the greenback.

Greenspan no doubt thinks he has been here before, having steered the US through the savings and loan crisis of 1990-91, the Mexican meltdown in 1995, the Long Term Capital Management fiasco in 1998 and September 11. This time, however, the problems appear more deeply rooted in the foundations of American capitalism, with much of the corporate sector under suspicion.

So, although his words are reassuring, they do not portend a quick bounce back for shares or confidence.

Ritblat renewal

THE sustained campaign by Laxey Partners to destabilise the ancien regime at British Land has failed.

But the intervention of the dissidents, armed with a bunch of shares borrowed for a fee from the institutions, has brought about some change. In the past, it was unthinkable that John Ritblat, the entrepreneur who built BL into the nation's second-largest property company, would give up the seat of power any time soon.

Now he has expressed his willingness to split the roles of chairman and chief executive, an important signal to the markets at these times of governance obsession. He has also acknowledged the need to add two independent directors to the BL board by the end of the current financial year.

What is less clear is the timetable for Ritblat to step back from the fray. It is clearly essential that, after a long period of stability, he gets the succession right.

No one wants a changeover like that which took place at GEC, after Lord Weinstock retired, which let into the nest vipers who proceeded to destroy one of the strongest balance sheets on the London Stock Exchange.

The key will be finding the right chairman. If the nomination committee can find someone of the calibre of former Lloyds bank boss Sir Brian Pitman, who is chairman of Next, then any institutional objections there might be to a family succession - with John Ritblat's son, Nick, taking the helm - might be mitigated.

As critical as the governance changes is the promise by Ritblat senior to look at the possibility of buying shares back to narrow the discount between BL's share price and its net asset value.

The mystery at BL is why it took a little-known group of shareholder activists, with no real history of tackling targets of this size, to encourage governance changes.

It seems astounding that it was left to a bunch of outside ' greenmailers', as Ritblat described them, to do the job while the shareholder organisations such as NAPF sat on their hands.