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Treasury evades the naked truth on naked calls

Section: Daily Dispatches

11:50p EST Thursday, March 30, 2000

Dear Friend of GATA and Gold:

The bottom of the following Reuters story today
suggests that GATA is making progress -- that is,
that the gold issue has started to come up by itself
when financial journalists and the highest U.S.
government officials get together and that we're
starting to put gold on the national radar screen.

Note that Fed Chairman Alan Greenspan's denial of
U.S. government intervention in the gold market applies
only to the Federal Reserve Bank of New York, and not
to our other suspects, particularly the U.S. Treasury
Department and the Exchange Stabilization Fund.

Please post this as seems useful.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *


By Mark Egan

WASHINGTON, March 30 (Reuters) -- Federal Reserve
Chairman Alan Greenspan told Congress in a letter,
released on Thursday, that the central bank was
concerned about supply-demand imbalances in the economy
and that stock valuations seem to have been a big
factor in the developing imbalance.

quot;The Federal Reserve is concerned about imbalances
between aggregate demand and supply and the
implications for inflation and thus sustainability of
the expansion,quot; Greenspan said in a letter answering
questions that arose during his Feb. 17 Humphrey-
Hawkins testimony.

quot;The sharp increase in equity valuation appears to have
been an important factor behind an apparently
developing imbalance,quot; he added.

Referring to the rising use of margin borrowing to buy
stocks, Greenspan said that quot;lenders and borrowers need
to assess carefully the risks they are assuming through
the use of margin.quot;

Greenspan also said he does not believe the Fed's
short-term monetary policy has quot;a significant effect on
stock prices.quot;

quot;Even if our operating procedures were associated with
somewhat larger movements in short-term rates, I doubt
that investors' perceptions of equity risks would be
much affected and thus that equity prices would be
significantly influenced,quot; he said, adding that changes
in margin rules would also have little effect on stock

Market speculation has persisted recently that the Fed
might intervene to make margin requirements more
stringent to dampen stock market speculation.

Current margin requirements, unchanged by the Fed since
1974, allow investors to finance 50 percent of a stock
purchase through margin debt. That effectively allows
investors to buy $200 worth of stock for every $100 of
cash on hand.

Margin requirements were mandated by Congress after the
stock-market crash of 1929.

The practice of buying stocks on margin has increased
markedly recently as the stock market has boomed. But
Fed officials have often noted that other types of
leverage -- in particular stock options and other
derivatives -- have also become much more popular, so a
change in margin requirements would not put much of a
dent into stock market speculation.

Some U.S. lawmakers have called for tougher margin
rules to make it harder for day traders to speculate.

The practice of day trading drew the attention of
Congress and regulators last summer after one day
trader killed nine people at two brokerages in Atlanta
and his family after totaling up more than $150,000 in

Asked to end speculation that the New York Fed had
intervened in the gold market, Greenspan responded: quot;I
can say unequivocally that the Federal Reserve Bank of
New York has not intervened in the gold market in an
attempt to manipulate the price of gold on its own
behalf or for the U.S. Treasury or anyone else.quot;