'Infectious greed' gripped US

AN uncharacteristically blunt Alan Greenspan today blasted the 'infectious greed' in corporate America that has led to 'fraud and falsification', but all the while assuring the world the US economy remains on track to achieve sustained growth.

The US Federal Reserve chairman's attempts to inject some much-needed calm into financial markets helped steady nerves, with US markets cutting opening losses toward mid-session. In London, the FTSE 100 ended ahead 27.4 at 4021.9.

Greenspan said considerable uncertainties, including potential for additional revelations of corporate malfeasance and weak capital spending, confronted America but that economic 'fundamentals are in place for a return to sustained healthy growth'.

His pointed comments about the effect of corporate scandals on the 'underpinnings of our society' were consistent with market expectations that the Fed will not raise US interest rates in the near future.

Greenspan blamed everyone from corporate executives to auditors to Washington's watchdog agencies for letting the system of corporate governance break down. 'Lawyers, internal and external auditors, corporate boards, Wall Street security analysts, rating agencies and large institutional holders of stock all failed for one reason or another to detect and blow the whistle on those who breached the level of trust essential to well-functioning markets,' he said.

The dollar slumped to its lowest against sterling for more than two years. The pound surged half a cent to $1.5740, while the euro pulled further away from dollar-parity to 1.0125.

Plunging stock markets and concerns about the strength of global recovery have forced most City economists to slash their forecasts for Britain's economic growth this year, an Evening Standard poll has found. On average, the economy is expected to expand by a feeble 1.6%, lower than the 1.9% pencilled in at the start of the year.

The consensus forecast is well below the Chancellor's 2% to 2.5% growth prediction, which is looking increasingly out of reach. This raises fresh fears that the Government's spending plans will blow a hole in the Treasury's accounts.