Transcripts may explain Greenspan's nervousness

January 07, 2004|By JAY HANCOCK

Dear Mr. Greenspan:

As your personal coach I must tell you: You're getting whiny.

I know, I know. You're still angry that people blame you for the 1990s bubble and the 2000-2002 stock crash.

Get over it. Or at least do a better job of hiding it.

We've heard your excuses - what? - three, four times. And they're pretty good excuses. But you're repeating yourself, Mr. Chairman.

We know you were focused on inflation, not stock bubbles. We know you don't think bubbles can be identified until after they pop.

We know you'd rather mop up post-bubble trouble than try to prevent it and perhaps trigger a premature recession.

We're not dumb, Mr. Chairman. The first couple of times you told us, we got it. But there you were again Saturday, justifying the ways of Greenspan to man.

"It is far from obvious that bubbles, even if identified early," you said, "can be pre-empted at lower cost than a substantial economic contraction and possible financial destabilization - the very outcomes we would be seeking to avoid."

You said the same thing three years ago. And a year and a half ago. And a year ago.

"Never complain and never explain." That was Benjamin Disraeli, Mr. Greenspan. Remember him? He did what was needed and let the facts speak for themselves. Queen Victoria loved him!

Don't turn into the Sphinx or J.D. Salinger - we need to know what the Fed is up to and why. But grow up and stop obsessing.

Of course you're worried about the transcripts of the 1998 meetings of the Federal Open Market Committee, the panel that sets interest rates for the nation.

The transcripts come out this month, and they won't be pretty. They'll almost certainly show you waxing on about the marvelous 1998 economy while your colleague Jerry Jordan, head of the Cleveland Federal Reserve Bank at the time, keeps saying: This is a stock bubble! Do something!

As reported in this column a year ago, we got a foretaste of Jordan's stock-bubble worries in the 1997 Fed transcripts. You knew Jordan (who did not return my phone call) would be on the record tentatively identifying a bubble you said was hard to identify, and you gave a defensive speech last year right before the transcripts came out to try to avert criticism.

Now you've done the same thing to try to defuse the imminent 1998 transcripts. "A personal statement," you called your Saturday speech, and not the views of the Federal Reserve.

Alan, Alan, Alan. You're starting to sound like you feel guilty.

What are you more worried about - your legacy or the economy? We're not exactly out of the recessionary weeds yet, and the image of a working Fed chairman writing and delivering his memoirs, speech by speech, while the economy smolders is not reassuring.

And you're doing it again! Stoking the stock market.

"There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the bubble's consequences rather than the bubble itself has been successful," you said on Saturday. "Despite the stock market plunge, terrorist attacks, corporate scandals, and wars in Afghanistan and Iraq, we experienced an exceptionally mild recession."

Tell that to the 2 million people whose jobs disappeared. And watch it with the "successful" stuff. You've already said you'll keep short-term interest rates near zero for a long time. Now you imply the economy is off to the races.

Sounds like a Wall Street "buy" signal to me.

Mr. Greenspan, please remember who you are: master of the universe, baron of basis points, rajah of repo agreements. Now take a cleansing breath. Say it slowly. Say it like you mean it:

I'm chairman of the Federal Reserve. I fixed the 1987 stock crash. I solved the 1997 Asian crisis. I saved the world from Long Term Capital Management, killed inflation and presided over perhaps the greatest boom in U.S. history.

I'm good enough. I'm smart enough. And doggone it, I don't care if people like me.

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