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Greenspan, experts share views on "The New Economy"

(3-10-2000)-- The nation's leading financial regulators and a who's-who of high-tech and Internet e-moguls converged at Boston College March 6 for a summit on "The New Economy," with Federal Reserve Chairman Alan Greenspan delivering the main address to an audience of approximately 1,800 at Conte Forum.

Greenspan, noting the technology revolution's enormous impact on the US economy, warned of potentially inflationary effects as demand for goods and services outstrips supply in a boom market.

"Until market forces, assisted by a vigilant Federal Reserve, effect the necessary alignment of the growth of aggregate demand with the growth of potential aggregate supply," Greenspan said, "the full benefits of innovative productivity acceleration are at risk of being undermined by financial and economic instability."

The chairman's remarks at the conference and in recent weeks have fed speculation by some market observers that the Fed is prepared to raise interest rates to protect against inflation. Greenspan s comments were seen contributing to a subsequent plunge in the Dow Jones Industrial Average, which posted its sharpest two-day loss since October 1998. By contrast, the technology-heavy Nasdaq index briefly soared above the magic 5,000-point ceiling on March 8.

Other conference keynote speakers were US Treasury Secretary Lawrence H. Summers, Securities and Exchange Commission Chairman Arthur Levitt and IBM Corp. Chairman and CEO Louis V. Gerstner Jr.

The conference also featured animated panel discussions involving some of the foremost barons of the New Economy, and other experts representing more traditional market perspectives: National Association of Securities Dealers Inc. Chairman and CEO Frank G. Zarb, overseer of the hot Nasdaq index; Internet financier David Wetherell, the chairman and CEO of CMGI; Desh Deshpande, co-founder and chairman of the skyro cketing Sycamore Networks Inc.; founder and CEO Jeff Taylor, and Lycos Inc. President and CEO Robert J. Davis.

Other panelists were: Mario Gabelli, chairman, CEO and chief investment officer for Gabelli Asset Management; Kay Koplovitz, CEO of the Working Woman Network; and MCI WorldCom President and CEO Bernard Ebbers. The moderator was C. Tyler Mathisen, host of "Market Watch" on CNBC.

Congressman Edward J. Markey (D-Mass.), '68, JD '72 and Boston College Senior Vice President James P. McIntyre were instrumental in gathering the galaxy of financial movers and shakers at the conference, which was hosted by the Carroll School of Management and organized in conjunction with Markey. University President William P. Leahy, SJ, served with Markey as honorary co-chairman of the event and offered welcoming and closing remarks to the audience.

Markey, the day's master of ceremonies, summed up the effect of the technology revolution on the local economy in his introduction of Davis, builder of the Waltham-based Web powerh ouse Lycos. "In Eastern Massachusetts, we used to make jet engines," Markey quipped. "Now we make search engines."

The astounding growth of information technology was the theme of the day, with technology investors such as Wetherell and Davis extolling the democracy and great capacit y for growth of the e-marketplace, but federal finance regulators urging old-fashioned prudence in approaching the New Economy.

Levitt warned against throwing caution to the wind in the runaway technology economy, describing a current-day scene reminiscent of the Roaring '20s prior to the Crash, as amateur day-traders borrow on their homes to buy Internet stocks on the margin.

"In a wave of optimism, too many investors, I fear, are over-extending themselves without understanding the consequences of their actions," said Levitt, who decried "a culture of gamesmanship [that has] taken root in the financial community."

But Zarb trumpeted the boom in the e-stock market that he said has led to unprecedented rates of participation by average citizens in the investment world. Zarb claimed 50 percent of US households now own stock, and that the Nasdaq Web site is logging 35 million hits a day. "Wall Street now belongs to Main Street," he said.

Summers, in an upbeat speech, predicted the rise of a global economy made possible by breakthroughs in information technology would come to be seen as the great story of the late 20th century.

"Ten years ago in Chicago I called my wife, simply to tell her that I was in a car that had a telephone," Summers recalled. "Seven years later, traveling abroad, I was handed a mobile phone to talk to then-Treasury Secretary [Robert] Rubin about the IRS. And I did not give it a second thought -- even though I was sitting in a canoe two hours outside Abidjan at the time.

"That experience brought together some of the most important forces in the world today: technology, markets, global integration and the changing source of economic value."

For more coverage of the Boston College Finance Conference, see the March 16 Boston College Chronicle

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