Greenspan’s Shocking Secret: Vast Bureaucratic Strengths

Maestro: Greenspan’s Fed and the American Boom , by Bob Woodward. Simon & Schuster, 270 pages, $25.

Like Saddam Hussein, Alan Greenspan has the knack of outlasting U.S. Presidents. Appointed chairman of the board of the governors of the Federal Reserve in 1987, Mr. Greenspan has seen out Ronald Reagan and George Bush, and will still have three years to go in his term when Bill Clinton says his farewells in January.

While Mr. Clinton mends fences in Hanoi and his successor squabbles over the Florida franchise, it is Mr. Greenspan, now age 74 and never once elected to political office, who embodies all that is timeless and reputable in the economic government of the United States. “It is crucial that there be some stable anchor in the economic system,” Mr. Greenspan once told his fellow Fed governors. Then he added, in his inimitable English: “It’s got to be we!”

The authority Mr. Greenspan has brought to the marble Federal Reserve building on Washington’s Constitution Avenue now receives its accolade. Bob Woodward, hitherto concerned with the commanding heights of power in the nation’s capital, has turned his gimlet gaze on the Federal Reserve Board and its long-serving chairman. It is hard to see either reverting to the business pages. A new political court is born.

Maestro has the hallmarks of Mr. Woodward’s earlier books: fair, painstaking, weighed down with pettifogging descriptive detail, not elegant, a little frantic. Mr. Woodward’s direct quotations have always belonged in an evidentiary category of their own. For a book so short, there is an inordinate amount of throat-clearing, acknowledgment and mumbo-jumbo about sources. The index would not shame a work five times the length.

But for all the efforts of his publishers to suggest the contrary, Mr. Woodward tells us nothing of substance in Maestro that we do not already know or strongly suspect. To get a full sense of Alan Greenspan, Mr. Woodward’s book should be combined with Justin Martin’s more biographical Greenspan: The Man Behind Money , which I reviewed in these pages in October.

Mr. Greenspan took office just in time for the stock market crash of 1987, and acquitted himself brilliantly. From 1989 to 1993, he drove rates of interest down to rock bottom and permitted a thoroughly insolvent U.S. banking system to turn a profit and rebuild its capital. In the middle 1990’s, when everybody was expecting boom to be followed by bust, he piloted the U.S. economy in for a so-called soft landing without the usual recession. In the last several years, he has managed an economy of bounding economic growth, low inflation and prodigious new employment.

Since Mr. Greenspan’s chief activity is to try to engineer almost imperceptible movements in the rate of interest at which the U.S. banks borrow from one another, his role in the great American success of the past decade must always be mysterious. Like the Roman general of old, he saves the republic by doing nothing. Over and over again.

Mr. Woodward gives the Fed chairman substantially all the credit for America’s present prosperity. With the usual unattributable sources backed up-at least until 1994-by transcripts of the regular meetings of the Federal Open Market Committee that sets the interest rate, Mr. Woodward presents a man of vast bureaucratic strengths.

An economist of the old school (before the profession fell into algebra), Mr. Greenspan has a passion for old-fashioned economic data: inventories, freight-car loadings, shipping times, rolled-steel production, labor-market trends. He spends most of his time reading or thinking. He knows that he is trying to manipulate the immense engine of the U.S. economy in a statistical fog. In some of the best scenes in the book, we find him in his shirt sleeves driving on the Fed staff to “slice and dice” the broad evidence into ever more exact and usable units.

Born and bred in New York City, Mr. Greenspan is probably more attuned to financial markets than any Fed chairman before him. Mr. Woodward reports that he checks the major markets every half-hour. As Mr. Greenspan himself put it, in a moment of brevity and clarity: “There is a certain, really quite unimaginable intellectual interest that one gets from working in the context where you have to put broad theoretical and fairly complex conceptual issues to a test in the marketplace.”

Yet the chairman possesses a visionary side that has raised eyebrows at the Fed and in the economics trade. It was a hunch-though a hunch reinforced by hard study-that persuaded Mr. Greenspan to jettison the great shibboleth of modern political economy: that unemployment could not fall below about 5 percent of the workforce without causing wages and prices to rise. The rest, as they say, is history. By 1999, the U.S. unemployment rate was 4.2 percent and economic growth was off the chart.

It helps that Mr. Greenspan is absolute lord of his institution. Deploying flattery, charm, rousing appeals to unity, veiled intrigue and, above all, the authority that only repeated success can bring, he has reduced the FOMC to a collection of yes men and yes women. We watch potential rivals such as Alan Blinder or Felix Rohatyn sidelined, in the first case, or, in the second, so badly undermined as to withdraw. At a tense meeting in the fall of 1996, Mr. Woodward writes, Janet Yellen, a Clinton appointee on the board, would have voted for a rate rise-but only in a secret ballot. As it was, she voted with the boss to keep rates unchanged.

Mr. Greenspan is also a master of political Washington. Though nominally Republican in allegiance, Mr. Greenspan gets on as easily with President Clinton as with Presidents Reagan and Bush. Precedence is important in Washington, and at President Clinton’s first State of the Union address in 1993, Mr. Greenspan sat between the First Lady and Tipper Gore. He seems to believe that no hour spent with a backwoods member of Congress is ever wasted. Though said to be no social barrel of laughs, he is a tireless party-goer.

Mr. Woodward does not say this, but I would guess that in a country such as the United States, which no longer has strong political beliefs, what matters is not party label but managerial aura. Mr. Greenspan has it in spades. In a town that is attempting to revive Virtue as a political category, it does him no harm to be known to be honorable and truthful.

Lastly, Mr. Greenspan has been successful in keeping both the press and the markets at bay. Intentionally or not, he is Delphic in almost everything he says. On two occasions in 1995, Mr. Woodward reports, some particularly murky Greenspanese provoked contradictory headlines in The New York Times and The Washington Post . As in the office, so at home: Mr. Greenspan evidently had to propose twice to NBC reporter Andrea Mitchell before she caught his drift and accepted him.

Mr. Woodward’s Greenspan is an edifying character, but a little wooden, like the Washington he inhabits, which is not the rackety Washington of Watergate or Iran-contra or Monica Lewinsky. The only non-automaton in this book is, as you would expect, the man who will always resist reduction to edifying stereotype: Bill Clinton.

Mr. Woodward is apparently not interested in the larger questions raised by Mr. Greenspan’s tenure at the Fed. Has Mr. Greenspan truly cracked the age-old conundrum of how not to debase a token currency? Is the secular conflict in modern society between debtor and creditor, wage-laborer and bondholder, ended in America for all time? And what if Mr. Greenspan, having made the Federal Reserve so powerful, hands it over to a thug or a turkey?

Give the man another term.

James Buchan’s latest novel is The Persian Bride , published by Houghton Mifflin .