Marketplace 12/11/2001

It's Tuesday, December 11, 2001.

Please excuse the "Do-It-Yourself" simile, but like WD-40 sprayed on a balky economy, the Federal Reserve cut interest rates today. Monitoring America's central bankers today is Marketplace's John Dimsdale in Washington.

Brancaccio:"John what was the big news today?"

Dimsdale:"Stop me if you've heard this -- the Fed cut interest rates today."

Brancaccio: "Yeah, seems like I've heard that before."

Dimsdale: "Eleven times this year."

Brancaccio: "So, let's look at something new. When will they reverse course?"

Dimsdale: "That depends who you ask. Some economists think we're already seeing the beginning of a recovery, thanks in large part to low interest rates. With all sorts of consumer-friendly mortgages and car loans, and business -friendly capital investment, economist Ian Shepherdson of High Frequency Economics is of 'the glass is half-full' persuasion."

Shepherdson: "By now, the rate cuts the Fed made way back in January should be having an effect. When you couple that with the tax cuts we've already seen in the summer and the big drop in gas prices -- as well all putting money in people's pockets -- there really is a substantial amount of stimulus in the pipeline. I think once we see that stronger data towards the end of the winter and into spring, it will surprise people with the magnitude of the recovery."

Dimsdale: "In their announcement this afternoon, the Fed acknowledged some signs of strength in the economy, but called them 'preliminary and tentative.' Overall, the interest-rate-setting committee thinks the bigger risks are for more weakness -- leaving the door open for further cuts early next year, which could last a while, according to Bear Stearns economist David Malpass."

Malpass: ": There are strong headwinds in the economy, including the idea that outside the U.S. there is a recession still going on in many places. What that means is the U.S. will have a bit of a recovery, but not with much strength at all. That may let the Fed leave rates at very low levels all through 2002."

Dimsdale:"Malpass says that's doable, thanks to longterm improvements in worker productivity -- and no signs of inflation.

In Washington, I'm John Dimsdale for Marketplace."

A Presidential Commission charged with examining the Social Security system has unanimously recommended allowing younger workers to invest a portion of their Social Security contributions in the stock market.

But with the economy slumping -- and Americans sense of stocks as a sure bet shaken-- the S&P is down 14 percent for the year so far, and it's unlikely Washington will act on this recommendation anytime soon. From the Marketplace Work and Family Desk, Stephen Henn reports.

Henn:"In a bid to drum up support for social security privatization, the president's commission spent serious time focusing on how the current system can sometimes fail to protect women from poverty -- particularly women who are divorced or widowed. Joy Simonson is a widow whose husband passed away three years ago.

After that of course, came the adjustment of his monthly benefit and that was something else again.

Simonson was able to fall back on a generous pension, but her social security benefit was another story."

Simonson:"As far as the cash benefit goes, I got a greatly reduced benefit, and if I had to depend on that I would have been in a sorry state indeed."

Henn:"Poverty rates for women over age 65 are 70 percent higher than they are for men. And according to social security commission members, like Leanne Abdnor, that's due at least in part to some quirks in benefit law that were built into the system back in the 1930s."

Abdnor:"If you are married and raising children for 9 years and then you and your husband divorce in fewer than 10 years, the wife would get nothing at retirement. In other words, our system penalized people who are married for less than 10 years."

Simonson:"The commission-proposed reforms would create private retirement accounts that would be split down the middle in a divorce.

Other proposed changes would improve widows benefits and guarantee minimum benefits for low-income Americans. But Heidie Hartman, executive director of the Institute for Women's Policy Research, says while these are good reforms, ultimately they have very little to do with creating individual accounts."

Hartman:"I think they are put in there because they know that individual accounts won't be very good for women -- so they want to improve widows benefits for women. By making a transition to individual accounts, they kind of have to repair all the holes they are making in the system."

Henn:"Although President Bush place social security reform at the top of his agenda while running for office a little over a year ago, with anticipated budget surpluses evaporating and enthusiasm for the stock market ebbing, most agree it's unlikely Congress will take up the issue anytime soon.

In Washington, I'm Stephen Henn for Marketplace.

The "Wall Street Journal" and "Bloomberg News" are among those reporting that Credit Suisse First Boston could pay as much as $100 million to settle government charges of abuses of the initial public offering market for technology stocks during the Internet boom. Among the accusations -- that Credit Suisse accepted kickbacks from clients who wanted to get their hands on lucrative offerings of new stock. The Securities and Exchange Commission is expected to announce a settlement before the year is out.

J.P. Morgan Chase is owed a lot of money by energy broker Enron. Today it sued to get some of it back. Morgan's lawyers figure $2.1 billion would be about right -- and not protected by Enron's bankruptcy filing.

And the controller of New York state has been trying to estimate the bonuses that Wall Street firms will pay out to their employees this holiday season. If the estimate is right, those envelopes will feel a little "light" -- $10 billion to 165,000 employees, with average bonus coming in at $60,000, compared with the $74,000 average last year. That's a drop of 30 percent.

And that's the top of our news for Tuesday, December 11, 2001. A record today on the stock market -- specifically a long-playing vinyl record. The Dow fell 33.33 today. That is to say a drop of 33 points, a third of a percent. Alas, I couldn't find any 45s. The NASDAQ went up 9 points, half a percent. Details when we do the numbers.

Music Bridge: Light Up My Room - Barenaked Ladies

Rundown

Ground Zero Day to Day
Since Sept. 11th, working near Ground Zero has become a commute to a battleground. In the brave new office, employees soldier on. Laura Sydell reports on how the war metaphor is transforming cigarette breaks and high heels.

Music Bridge: Sad Piano theme - Final Fantasy VIII soundtrack

Afghani Currency Market
During World War II, Germans papered their walls with what had become worthless bills. The war in Afghanistan is having the opposite effect on that nation's currency. Jeff Tyler reports.

Music Bridge: Fifth Element theme - Khaled Alech Taadi

Dark Dance Commentary
The war on terrorism and the global recession are caught in a sort of dark dance. And Commentator David Rothkopf says no economic stimulus package is going to disentangle them.

Music Bridge: Being John Malkovich theme - Carter Burwell

Look-Ahead
Coming up later on Marketplace, digging in your couch for spare change is no longer just the stuff of fast food commercials. Coin exchange machines are now big business.