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GREENSPAN EYES MARGIN DEBT

Federal Reserve Chairman Alan Greenspan admitted Wednesday he was "obviously" worried that margin borrowing to finance the buying of stocks had "moved up a pace" into the close of 1999. In remarks to the Senate Banking Committee, Greenspan said the surge had "caught our attention" and was prompting "a good deal of evaluation" by the Fed.

However, Greenspan indicated the Fed was not on the verge of acting to curtail the surge in margin debt.

Greenspan was appearing before the Senate panel, which is weighing President Bill Clinton's nomination of the Fed chairman to a fourth term. The committee will vote on the nomination Tuesday.

Data released recently by the New York Stock Exchange showed margin debt jumped by $22 billion in December, following a $24 billion gain in November. Over the whole of 1999, it rose 62%. Private sector analysts have observed that although the growth in margin debt had previously been in line with the rise in market capitalization, in recent months the 2 had de-coupled.

"There has been considerable conversation going on with respect to addressing this issue because it goes beyond the mere issue of stocks," Greenspan said, adding margin borrowing also affects futures and options markets.

"I'm not about to suggest we're about to do anything at this stage, but I would confirm we are doing a good deal of thinking," Greenspan said.

Greenspan's comments on the margin debt surge were the highlight of a hearing that offered little new insight on the Fed's assessment of economic conditions. He made no direct comments on the likely direction of interest rates, but did little to sway most economists who believe the Fed will raise rates next week.

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