Gates at White House After Judicial Ruling

By Steve Holland

WASHINGTON (Reuters) - Microsoft Chairman Bill Gates set aside his differences with the government's antitrust case against him on Wednesday and appeared at a White House ``new economy'' conference that heard some alarm bells about the gyrating stock market.

``We're at the beginning of what the computer can do to change our lives. The best is yet to come,'' Gates told the conference hosted by President Clinton, two days after a federal judge ruled Microsoft broke the law by trying to control the market for Internet browsers.

Reuters Photo

The daylong conference, weeks in the planning, took on added urgency this week when the tech-heavy Nasdaq fell 500 points before rebounding on Tuesday, reflecting concerns that many Internet stocks are overvalued and the booming U.S. economy might be losing steam.

Gates said the ``technology revolution has been one of the greatest job creation engines ever,'' and will lead to ''breakthroughs that will allow computers to listen, to learn, to be in a tablet form connected up to a wireless network that you just carry around with you.''

Gates, the world's wealthiest man, was not the only star attraction among luminaries gathered in the White House East Room beneath the portraits of George and Martha Washington.

The other was Federal Reserve Board Chairman Alan Greenspan, the 74-year-old financial seer given an ample share of credit for the U.S. economy's longest expansion ever.

Greenspan, whose war on inflation has prompted five interest rate increases since June 1999, said the rise in stock prices risked fostering inflation but that he was not out to hurt stock prices.

In a carefully worded speech watched closely by Wall Street, Greenspan issued a veiled warning about the recent run-up in the price of technology shares.

``History will judge'' whether the expectation of sharply higher profits for technology companies that had driven the gains in their share prices was ``prescience'' or ``wishful thinking,'' he said.

Attention momentarily abandoned Greenspan when Clinton, seated next to Gates, leaned over, put his hand on the computer magnate's back and whispered into his ear. Cameras snapped anxiously for the prime photo.

Microsoft spokeswoman Ginny Terzano said Gates was delighted to appear and felt the antitrust case was ``completely separate'' from Clinton's conference.

``It didn't appear to be awkward in any way,'' Trevor Nielson, spokesman for the Bill and Melinda Gates Foundation, said of a brief meeting Clinton and Gates had before the session.

Overall, there was plenty of praise among participants about the strength of the economy, to the delight of Clinton, who wants it to be his lasting legacy.

Reuters Photo

Introducing Greenspan, Clinton spoke with pride that he and the dour Fed chairman had been dubbed the ``odd couple.''

``I took it as a compliment, and I hope he wasn't too chagrined,'' Clinton laughed. ``Mr. President, I took it as a compliment as well,'' said Greenspan.

Lurking beneath the optimism were concerns that the party will not last forever.

``There's going to be a correction -- probably a sharp one,'' said Roger Altman, the former U.S. deputy treasury secretary who now works as an investor.

He said stock gyrations reflected ``preliminary signs of that type of correction.''

``These are good times, very good times,'' said James K. Galbraith, professor at the University of Texas in Austin.

But he added, ``Are there dangers? Yes, I believe there are. Inflation, apart from oil prices, is not one of them. High interest rates are a danger. American households, I believe have too much debt. They will become vulnerable when interest rates rise.''

``Are there any clouds on the horizon?'' asked Yale economics professor William Nordhaus. ``We don't know when or where or how the economy will slow down but I think the betting odds are long against another four years as strong as the last four years.''

He said stock prices are not only ``unrealistically high'' but economically damaging. ``Inflated asset values make people feel wealthier than they are, and they reduce national savings,'' he said.

Clinton found himself on the defensive from some participants for his policies of reducing the U.S. budget deficit and for not doing more to reduce America's global trade deficit.

He said he felt reducing the U.S. budget deficit would keep interest rates down and the economy going, a policy that Greenspan has praised.

Clinton said he has not moved against the flood of imports driving up the U.S. trade deficit -- to a record $28 billion in January -- because he believed it helped Mexico and Asia rebound from their financial crises.

``There's no question in my mind that the openness of our markets in the last seven years has kept inflation down and enabled us to grow more,'' he added.