Feb 11 2003


The Committee will come to order. I am very pleased this morning to welcome Chairman Greenspan before the Committee on Banking, Housing and Urban Affairs, to testify on the Federal Reserve's Semi-Annual Monetary Policy Report to the Congress.

Chairman Greenspan, our nation's economy appears to be highly resilient. Last year accounting scandals and corporate misdeeds unnerved investors and weakened trust in financial markets. The war on terrorism and our continuing efforts to enhance homeland security consume valuable resources but are necessary to preserve long-term security and freedom.

Despite these challenges, the economy grew at a 2.8 percent pace in 2002 with inflation remaining low at only 1.3 percent. Productivity growth was more impressive. On an annual average basis, productivity in both the business and nonfarm business sectors rose 4.7 percent in 2002 – the fastest pace since 1950 and more than four times the 1.1 percent gain posted in 2001. On the unemployment front, the unemployment rate decreased to 5.7 percent in January, falling three-tenths of a percentage point from December's 6 percent, and hit its lowest level since September 2002.

On the economic front, consumers continue to be a source of strength to this economy. Many homeowners have benefitted from record low interest rates as they purchase new homes and refinance mortgages. Residential investment remains strong, but business investment continues to be weak. This is certainly a source of concern as we look to businesses to purchase new equipment and hire new workers.

I believe that ending the double tax on corporate income and permanently raising expensing limits for small firms would stimulate more of this needed investment. While it would be difficult to repeat the productivity gains of last year, we need to continue to focus on what can be done to further grow the economy, improve productivity and ultimately the standard of living for all workers.

This requires that we look to our fiscal policy for improvement. I believe the President has put forward a very thoughtful, targeted and balanced plan that would not only stimulate the economy in the short term, but make very positive long term policy changes that would sustain strong economic growth.

Just as vital to our success in achieving these goals is the underlying credibility and integrity of our capital markets.

This morning the Committee voted to send forward the nomination of William Donaldson to chair the Securities and Exchange Commission. I believe that he has the stature and experience to provide the strong leadership that will be necessary to help set the tone for the high standards of corporate governance and financial reporting that our markets demand.

Mr. Chairman, we are pleased to have you with us this morning and we look forward to discussing with you the necessary actions we must take to ensure that our economy grows and prospers in the coming years. I look forward to hearing your remarks.