Message-ID: <28646059.1075852636482.JavaMail.evans@thyme> Date: Fri, 14 Sep 2001 05:36:54 -0700 (PDT) From: gary.hickerson@enron.com To: greg.whalley@enron.com, mike.mcconnell@enron.com, a..shankman@enron.com Subject: FW: Very Interesting Article from The Washington Post Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Hickerson, Gary X-To: Whalley, Greg , Mcconnell, Mike , Shankman, Jeffrey A. X-cc: X-bcc: X-Folder: \JSHANKM (Non-Privileged)\Deleted Items X-Origin: Skilling-J X-FileName: JSKILLIN (Non-Privileged).pst This is an interesting article. Gary -----Original Message----- From: Greene, John Sent: Friday, September 14, 2001 7:25 AM To: Hickerson, Gary Subject: FW: Very Interesting Article from The Washington Post FYI - I am sure we already have enough of our own stocks on the books but this may be worth relaying to Greg, et al. -----Original Message----- From: Towarek, Michael Sent: Friday, September 14, 2001 11:44 AM To: Greene, John Subject: FW: Very Interesting Article from The Washington Post > > Stocks to Trade Monday With Special Rule > Big Firms Can Buy Shares Back to Halt Plunge > By Kathleen Day and John M. Berry > Washington Post Staff Writers > Friday, September 14, 2001; Page E01 > In advance of the planned reopening of U.S. stock markets on Monday, major > securities firms and corporations have reached an extraordinary agreement > to prop up prices by buying shares if a flood of sell orders threatens to > send the markets into a free fall, industry and government sources said > yesterday. > Federal securities regulators have made it clear they will permit these > and other market practices that might raise legal questions in ordinary > circumstances, the sources said. Securities and Exchange Commission > Chairman Harvey Pitt alluded to the informal accord yesterday when he said > the agency would make it as easy as possible for companies to buy back > their own shares and would open a hot line for brokers and companies with > questions about proper trading practices. > The government's green light was signaled late yesterday after a major > firm approached the SEC requesting that the rules concerning share > buybacks be relaxed temporarily because of widespread fears of an investor > panic in reaction to Tuesday's terrorist attacks, Wall Street sources > said. > "We intend to make it easy for public corporations to repurchase their > shares," Pitt said at a news conference with New York Stock Exchange > Chairman Richard A. Grasso and Nasdaq Chairman Harwick Simmons. But Pitt > also made it clear the agency will be making sure investors don't get > gouged, which securities lawyers interpreted to mean that the SEC will > allow corporate buybacks only to the extent that they don't hurt investors > by unfairly propping up or depressing individual company prices. > The SEC chief said he will announce today a number of steps "to facilitate > an orderly market." He hinted strongly that short selling -- a practice in > which investors bet that stock prices will fall -- will be restricted. > "With respect to short selling, the goal of all of us is to have a market > that most closely approximates the normal trading environment," he said. > "As a result of that, you can tell in which direction we will probably be > leaning." > The plan to resume stock trading on Monday after a four-day halt -- the > longest since the Great Depression -- depends on a test of market systems > scheduled for Saturday, the three men said. > Securities industry executives interviewed yesterday said the Monday > target is attainable but privately voiced concern about whether it will be > met, warning that power outages, disrupted phone service and structural > damage to buildings are proving to be more daunting than expected. > While industry and government officials have struggled for days with the > technical obstacles to reopening the U.S. markets -- the largest in the > world -- the agreement yesterday reflected their concerns about the > potential psychological hurdles ahead. > "As the market opens on Monday, no one knows what will happen," said an > executive of a major securities firm. "But people have been made aware > that they're looking at facilitating the ability of companies to purchase > shares if the market gets wacky." > Pitt would not disclose details about how stock buyback rules will be > eased, but SEC steps could include relaxing rules about the volume of > stock that can be purchased and allowing such trades at the beginning and > end of trading sessions, securities industry experts said. > Sources said the SEC's decision is similar to steps the agency took to > restore stability and confidence in the aftermath of the 1987 market > crash. > Before the SEC was created in the early 1930s, powerful Wall Street > figures tried on occasion to prop up the market in times of distress. J.P. > Morgan stopped a panic in 1907 that way. In October 1929, Richard Whitney, > an exchange official, became a national hero by walking onto the jittery > trading floor and placing a bold order to buy U.S. Steel above its price > at the time. The move, backed by a group of bankers, buoyed hopes and > prices -- but only for two days. Then the market crashed. > Yesterday, the Federal Reserve, which pumped a record $38 billion into the > U.S. banking system on Wednesday, put in another $70 billion in the > afternoon to ensure that brokerage firms, investment banks and other > companies providing financial services have no trouble financing loans or > other types of investment activity. > In another effort to shore up market confidence, Treasury Secretary Paul > H. O'Neill issued a statement before television cameras taking sharp issue > with the concerns, voiced by many private economists, that the terrorist > assault will tip the slowing U.S. economy into a recession by destroying > consumer confidence. > "The destruction in New York City is horrible and detestable. At the same > time, America's dynamic economy is not located in any one place," O'Neill > said. "Innovation and productivity are found in every factory and farm, > every laboratory, every financial institution, every small business and > every home office across America. That spirit cannot be destroyed." > Although the tragedy will cause some supply disruptions and transportation > stoppages, "these effects will be transitory," O'Neill said. "The > prospects for a rebound in the U.S. economy [later this year] remain > unchanged." > Helping to bolster optimism was the performance of markets in Europe, > which continued to claw their way back from the steep drops Tuesday that > followed the attacks on the World Trade Center and Pentagon. Germany's DAX > index rose 1.32 percent, and London share prices were up 1.26 percent, > though France's CAC 40 index dipped slightly. Japan's Nikkei index eked > out a gain of 0.03 percent, and Hong Kong's Hang Seng index rose 0.8 > percent. > But two pieces of news yesterday underscored how shaky the U.S. economy > was even before this week's events. > A monthly survey of consumer sentiment dropped to an 8 1/2-year low in the > first part of this month. The survey, compiled by the University of > Michigan, provided a reading of 83.6, down from 91.5 the month before, and > by far the lowest since sentiment began falling late last year. > Significantly, both consumers' assessment of the state of the economy and > their expectations about it six months from now deteriorated noticeably. > Analysts at the university said the "early September loss was due to > heightened concerns about future prospects for the national economy as > well as more pessimistic assessments by consumers of their own financial > situation." Given the shock of the terrorist attacks, "the likelihood that > the economic downturn could turn into a full-fledged recession has grown > substantially." > Meanwhile, the Labor Department said the number of initial claims for > state unemployment benefits jumped to 431,000 last week, well above the > 400,000 level that had been reported for several weeks. A number of > analysts said the increase was a sign that the labor market is continuing > to deteriorate and that joblessness is certain to continue rising. > In the U.S. government bond market, where trading resumed yesterday after > a two-day hiatus, yields on some Treasury bills plummeted more than > four-tenths of a percentage point. Yields on six-month bills tumbled to > 2.72 percent, the lowest level in decades. > Analysts said the sharp drop was the result of several factors, including > the "flight to quality" impulse that often materializes during crises as > investors move money into U.S. government securities, which are viewed as > the safest in the world. Strong demand for bonds causes yields to drop as > investor become more willing to hold them regardless of their yields. > Yields were also depressed by expectations of many investors and analysts > that the Fed will cut interest rates no later than its next policymaking > session on Oct. 2. That would be the eighth rate cut since the beginning > of the year. > SEC officials did an about-face from Wednesday, when a spokesman said the > agency didn't know where investors having trouble contacting brokers > should go to learn about their accounts and money. Pitt said that in > addition to the hot line for financial institutions, the agency would > today open another one for investors who have questions about their > accounts. The numbers will be posted on the SEC's Web site (www.sec.gov). > The National Association of Securities Dealers, the parent company of > Nasdaq and the American Stock Exchange, said it will post on its Web site > today (www.nasdr.com) information about where investors with questions can > go. > A Nasdaq spokesman also had to backtrack yesterday from a statement > Simmons made Wednesday, apparently in error, that 19 of the 32 securities > firms with offices in the World Trade Center had not been heard from. The > spokesman said in fact Nasdaq had heard from 25 of the 32. It hadn't tried > to contact the other seven. All 25 have said they can be up and running, > at least in some capacity, the spokesman said. > Staff writers Paul Blustein and Glenn Kessler in Washington and Carol > Vinzant in New York contributed to this report. >