Maestro

by Bob Woodward

  On April 18: See John Berry, “Did Greenspan Face Fed Revolt? Reports of Internal Challenge,” The Washington Post, April 18, 1991, A1.

  “In my judgment”: Greenspan quoted from Transcript, Federal Open Market Committee Meeting, April 30, 1991, 1.

  “Look, we’ve got to decide on Greenspan”: See also the author’s series “Making Choices: Bush’s Economic Record,” The Washington Post, October 4–7, 1992.

  “Just to top the day”: Greenspan-Bush dialogue quoted from Weekly Compilation of Presidential Documents, volume 27, number 28, Monday, July 15, 1991, 934–938.

  Two days later: See “A Stiffer Spine for Mr. Greenspan,” The New York Times, July 12, 1991, A28.

  “At this stage”: Greenspan’s testimony and the analysis of his comments quoted from David E. Rosenbaum, “Greenspan Optimistic on Economic Outlook,” The New York Times, July 17, 1991, D1.

  On October 28: Greenspan’s speech quoted from John Berry, “Greenspan Notes Weak Recovery; Prospect Is Raised for Interest Rate Cut,” The Washington Post, October 29, 1991, D1.

  On December 19, 1991: See Board of Governors of the Federal Reserve System, 78th Annual Report to Congress, April 15, 1992, 96. The Federal Reserve’s annual report covers the overall economic situation in a given year, and it also lists the specific actions—and reasons for those actions—of the Board of Governors and the FOMC. The report records all votes and briefly explains the rationale both for the votes and for any dissents from those votes. The FOMC section includes minutes for each meeting; in the absence of transcripts, those minutes are useful for an understanding of the period 1995–99.

  “It’s sort of Merry Christmas”: See John M. Berry, “Fed Lowers Key Rate to 3.5 Percent,” The Washington Post, December 21, 1991, A1.

  The Wall Street Journal published a long front-page story: See Alan Murray and David Wessel, “Giant Step: Changing Its Course, The Fed Boldly Tries to Bolster Economy . . . How Greenspan Turned the Tide,” The Wall Street Journal, December 23, 1991, A1.

  CHAPTER 6

  Most of the information in this chapter comes from the author’s interviews with six knowledgeable sources.

  Greenspan hoped: For more information on the Greenspan-Darman-Brady relationship, see the author’s series “Making Choices: The Bush Economic Record,” The Washington Post, October 4–7, 1992.

  On June 23: See Steven Greenhouse, “Bush Calls on Fed for Another Drop in Interest Rates,” The New York Times, June 24, 1992, A1.

  Lawrence Lindsey: See Transcript, Federal Open Market Committee Meeting, June 30–July 1, 1992, 32.

  Greenspan didn’t say anything: Greenspan quoted, through “where I come out,” from Transcript, Federal Open Market Committee Meeting, June 30–July 1, 1992, 66–67.

  The Board of Governors immediately voted: See Board of Governors of the Federal Reserve System, 79th Annual Report to Congress, April 16, 1993, 107–108.

  Greenspan convened: See Transcript, Federal Open Market Committee Conference Call, July 2, 1992, 1–2.

  On September 4: See Board of Governors of the Federal Reserve System, 79th Annual Report to Congress, April 16, 1992, 161.

  On October 6: See David Wessel, “Pushing Policy: Fed’s Vice Chairman, Seeking Lower Rates, Furthers a Bush Goal . . . Has Shown He Can Sway Greenspan,” The Wall Street Journal, October 6, 1992, A1.

  “We likely will be confronted”: Mullins quoted from Transcript, Federal Open Market Committee Meeting, October 6, 1992, 34.

  “This has to be”: Greenspan’s interaction with the FOMC quoted from Transcript, Federal Open Market Committee Meeting, October 6, 1992, 41–52.

  “This would be an irresponsible action”: Greenspan quoted from “Fed Chief Affirms Its Independence,” Associated Press, as it appeared in The New York Times, October 11, 1992, A32.

  Clinton had promised presidential action: “The economy, stupid,” or “It’s the economy, stupid,” was one of the main slogans of Clinton’s campaign for the presidency. Initially placed on the wall of the Clinton campaign headquarters in Little Rock—known as the War Room—by James Carville, the slogan and its folksy focus on the country’s economic woes became a centerpiece of the Clinton campaign and became Clinton’s first order of business after his election.

  When President-elect Clinton invited Greenspan: For the first published detailed account of this meeting, see Bob Woodward, The Agenda (1994), 65–69.

  CHAPTER 7

  Most of the information in this chapter comes from the author’s interviews with three knowledgeable sources.

  Greenspan’s real connection: For more on the relationship among Greenspan, Bentsen and the Clinton administration’s deficit targets, see also Bob Woodward, The Agenda (1994), 112–162.

  On February 19: Greenspan quoted from Steven Greenhouse, “Clinton’s Program Gets Endorsement of Fed’s Chairman,” The New York Times, February 20, 1993, A1. See also Eric Pianin, “Clinton Plan Gains Greenspan Praise,” The Washington Post, February 20, 1993, A1; John Berry, “Greenspan Vows to Help Clinton,” The Washington Post, February 20, 1993, C1.

  “Just yesterday”: Clinton quoted from Transcript, Remarks by the President to the U.S. Chamber of Commerce, Constitution Hall, Washington, D.C., February 23, 1993, 11:15 a.m.

  “Regrettably”: Greenspan quoted from Alan Greenspan, “Remarks to the Economic Club of New York,” April 19, 1993, 12.

  On May 13: See Lucinda Harper, “Consumer Prices Jumped 0.4% During April—Uptick Contradicts Pace of Recovery, Possibly Posing Problem for Fed,” The Wall Street Journal, May 14, 1993, A2.

  “I think you are all aware”: Greenspan quoted, through “meeting came out,” from Transcript, Federal Open Market Committee Meeting, May 18, 1993, 1.

  He summarized: See Transcript, Federal Open Market Committee Meeting, May 18, 1993, 6.

  Turning to the perplexing inflation: Greenspan quoted, through “really doing,” from Transcript, Federal Open Market Committee Meeting, May 18, 1993, 9–10.

  One bank president suggested: For the FOMC’s general discussion, see Transcript, Federal Open Market Committee Meeting, May 18, 1993, 12–32.

  “The longer we go”: Angell quoted, through “strong about it,” from Transcript, Federal Open Market Committee Meeting, May 18, 1993, 33.

  David Mullins argued: See Transcript, Federal Open Market Committee Meeting, May 18, 1993, 35–37.

  After a coffee break: Greenspan, Corrigan and Mullins quoted from Transcript, Federal Open Market Committee Meeting, May 18, 1993, 38–52.

  Greenspan reminded them again: Greenspan quoted, through “three times out of four,” from Transcript, Federal Open Market Committee Meeting, May 18, 1993, 53–54.

  Six days later: See David Wessel, “Fed Vote Shows Growing Worry About Inflation,” The Wall Street Journal, May 24, 1993, A2.

  The New York Times wrote: See Steven Greenhouse, “The Federal Reserve Prepares for a Rate War,” The New York Times, June 1, 1993, D1.

  “Obviously, it’s good news”: Myers quoted from Transcript, White House Press Briefing by Dee Dee Myers, June 11, 1993, 8.

  Moynihan had written a long: See Daniel Patrick Moynihan, “Don’t Blame Democracy,” The Washington Post, June 6, 1993, C7.

  Greenspan noted: Greenspan quoted, through “quite dramatically,” from Transcript, Federal Open Market Committee Meeting, July 6–7, 1993, 73–74.

  “Just remember”: Greenspan quoted from Transcript, Federal Open Market Committee Meeting, July 6–7, 1993, 87.

  “If you appear to be backing off”: Greenspan quoted from John Berry, “Greenspan Urges Congress to Cut Deficit $500 Billion,” The Washington Post, July 21, 1993, F1.

  In August: For a more detailed account of the passage of Clinton’s economic plan, see also Bob Woodward, The Agenda (1994), 280–367.

  He settled into the newest: See U.S. Department of Commerce, Economics and Statistics Administration, “Current Industrial Reports: Manufacturers’ Shipments, Inventories, and Orders,” September 2, 1993
.

  He examined the Labor Department unemployment statistics: See U.S. Department of Labor, Bureau of Labor Statistics, “The Employment Situation: August 1993,” September 3, 1993.

  Next he examined: See U.S. Department of Labor, Bureau of Labor Statistics, “Productivity and Costs: Second Quarter 1993,” September 9, 1993.

  “There is something wrong”: Greenspan quoted, through “just don’t square,” from Transcript, Federal Open Market Committee Meeting, September 23, 1993, 35–36.

  The “Survey of Current Business”: See U.S. Department of Commerce, Bureau of Economic Analysis, “Survey of Current Business: The Business Situation,” October 1993.

  At the November 16 FOMC meeting: Greenspan quoted from Transcript, Federal Open Market Committee Meeting, November 16, 1993, 87.

  “In short,” he said: Mullins quoted from Transcript, Federal Open Market Committee Meeting, December 21, 1993, 25.

  Greenspan remarked: Greenspan quoted, through “begin today,” from Transcript, Federal Open Market Committee Meeting, December 21, 1993, 31–32.

  “We have one additional item”: Greenspan and discussion of taping quoted from Transcript, Federal Open Market Committee Meeting, December 21, 1993, 40–52.

  CHAPTER 8

  Most of the information in this chapter comes from the author’s interviews with five knowledgeable sources.

  On January 21, 1994: See also Bob Woodward, The Agenda (1994), 377–379.

  He testified: Greenspan quoted from Paulette Thomas, “Higher Rates Are Expected by Greenspan,” The Wall Street Journal, February 1, 1994, A2; see also Thomas D. Lauricella and Lauren Young, “Greenspan’s Comments on Interest Rates Appear to Have Little Impact as Most Bond Prices Fall,” The Wall Street Journal, February 1, 1994, C23.

  “We are at the point”: Greenspan quoted, through “running away,” from Transcript, Federal Open Market Committee Meeting, February 3–4, 1994, 45–47.

  “Well,” Greenspan responded: Greenspan quoted, through “measure we know of,” from Transcript, Federal Open Market Committee Meeting, February 3–4, 1994, 53.

  “You know,” Greenspan finally said: Greenspan-Lindsey-McDonough-FOMC exchange quoted from Transcript, Federal Open Market Committee Meeting, February 3–4, 1994, 55–58.

  Greenspan expressed pride: Greenspan quoted from Transcript, Federal Open Market Committee Conference Call, February 28, 1994, 3.

  On March 22: For the FOMC’s rationale for the March and April increases, see Board of Governors of the Federal Reserve System, 81st Annual Report to Congress, May 25, 1995, 139–151.

  At the May 17 committee meeting: Greenspan quoted from Transcript, Federal Open Market Committee Meeting, May 17, 1994, 32–33.

  Mortimer B. Zuckerman: See Mortimer B. Zuckerman, “Is the Fed Paying Attention?” U.S. News & World Report, July 12, 1993, 95; Mortimer B. Zuckerman, “It’s the Global Economy, Stupid,” U.S. News & World Report, August 9, 1993, 99; Mortimer B. Zuckerman, “Greenspan Goofs Again,” U.S. News & World Report, February 14, 1994, 62; Mortimer B. Zuckerman, “Amending John Maynard Keynes,” U.S. News & World Report, April 18, 1994, 80; Mortimer B. Zuckerman, “It’s Still the Economy,” U.S. News & World Report, October 24, 1994, 92. After 1995, Zuckerman thought Greenspan managed interest rate policy brilliantly. Mortimer B. Zuckerman, “The Fed Taps the Brakes,” U.S. News & World Report, May 29, 2000, 68.

  CHAPTER 9

  Most of the information in this chapter comes from the author’s interviews with five knowledgeable sources.

  In a lecture loaded with charts: See Bob Woodward, The Agenda (1994), 82–86.

  Though a piece in The New York Times: See Keith Bradsher, “2 Economists Nominated to Fed,” The New York Times, April 22, 1994, A39.

  the Associated Press piece: See “Senate Confirms Clinton Pick for Federal Reserve Board,” Associated Press, June 24, 1994, Business News.

  Other stories: See Steve H. Hanke and Sir Alan Walters, “Glitter in Gilts,” Forbes, June 20, 1994, 268; Virginia Postrel, “Fed Up: The Problems of the Federal Reserve,” Reason 26, 3 (July 1994), 4.

  one story in Investor’s Business Daily: See “The Economy; Blinder, Yellen Named,” Investor’s Business Daily, April 25, 1994, B1.

  “I’d just like to say”: Blinder quoted from Transcript, Federal Reserve Open Market Committee Meeting, August 16, 1994, 24.

  Yellen said she agreed: Yellen quoted from Transcript, Federal Reserve Open Market Committee Meeting, August 16, 1994, 28.

  “Let me get started”: Greenspan-Blinder scene quoted from Transcript, Federal Open Market Committee Meeting, August 16, 1994, 30–35.

  Nearly all of the coverage: See Keith Bradsher, “Federal Reserve Raises Key Rates to Cool Economy,” The New York Times, August 17, 1994, A1; Paulette Thomas, “Fed Lifts Short-Term Rates by Half a Percentage Point,” The Wall Street Journal, August 17, 1994, A2; Clay Chandler, “Fed Raises Short-Term Rates Again,” The Washington Post, August 17, 1994, A1.

  “It is quite clear”: Blinder’s speech quoted from Paul Starobin, “Blindsided,” National Journal, October 8, 1994.

  Blinder was dismayed to read: See Keith Bradsher, “Fed Official Disapproves of Rate Policy,” The New York Times, August 28, 1994, A6.

  On Monday: See Keith Bradsher, “A Split Over Fed’s Role; Clashes Seen After Vice Chairman Says Job Creation Should Also Be a Policy Goal,” The New York Times, August 29, 1994, D1. Bradsher was relatively new to the Fed beat, and a number of people who attended Blinder’s speech maintain that Bradsher made too much of the matter. Blinder’s comments—though perhaps a bit testy and provocative—were generally in line with the Federal Reserve Act. See John Berry, “The Fed’s Storm That Wasn’t; Alan Blinder Finds a Short Talk Can Make One Monetary Policy Look Like Two,” The Washington Post, September 8, 1994, B11; Hobart Rowen’s op-ed, “Frankness and the Fed,” The Washington Post, September 15, 1994, A17.

  A New York Times story disagreed: See Keith Bradsher, “Tough-Decision Time for the Federal Reserve; New Vice Chairman Stirs the Board’s Pot,” The New York Times, September 26, 1994, D1.

  Newsweek columnist Robert J. Samuelson declared: See Robert J. Samuelson, “Economic Amnesia,” Newsweek, September 13, 1994, 52.

  The next day: See Keith Bradsher, “Fed Deputy Denies Rift with Chief,” The New York Times, September 9, 1994, D1.

  He talked to The Wall Street Journal: Blinder quoted from David Wessel, “Blinder Denies There’s a Rift with Fed Chief,” The Wall Street Journal, September 9, 1994, A2.

  “Now, what concerns me most”: Yellen and Blinder quoted from Transcript, Federal Open Market Committee Meeting, November 15, 1994, 30–33.

  “I must say”: Greenspan quoted from Transcript, Federal Open Market Committee Meeting, November 15, 1994, 34–36.

  “I fear that doing”: Blinder-Greenspan exchange quoted from Transcript, Federal Open Market Committee Meeting, November 15, 1994, 42–43.

  CHAPTER 10

  Most of the information in this chapter comes from the author’s interviews with nine knowledgeable sources. Eight were interviewed on numerous occasions on background. Senator Robert Bennett was interviewed on the record on July 19, 2000.

  Treasury eventually loaned: For more on Greenspan’s, Rubin’s and Summers’s rationale for intervention in Mexico, see U.S. Government Printing Office, Hearings Before the Committee on Banking, Housing, and Urban Affairs, “The Mexican Peso Crisis,” Friday, March 10, 1995, 353–365.

  In the February 1, 1995, meeting: For more information about the discussion at the meeting, see Board of Governors of the Federal Reserve System, 82nd Annual Report to Congress, May 6, 1996, 110–126.

  Greenspan noted: Greenspan quoted from U.S. Government Printing Office, Hearing Before the Committee On Banking, Housing, and Urban Affairs, United States Senate, “Federal Reserve’s First Monetary Policy Report For 1995,” 14.

  On the good news front: Greenspan quoted from Keith Bradsher, “Greenspan Sees Chance of Recession,” The
New York Times, June 8, 1995, D1.

  contradictory headlines: See Keith Bradsher, “Greenspan Sees Chance of Recession,” The New York Times, June 8, 1995, D1; John M. Berry, “Recession Is Unlikely, Greenspan Concludes,” The Washington Post, June 8, 1995.

  “Well,” Panetta said: Panetta quoted from Keith Bradsher, “A Rare Nudge for a Drop in Rates,” The New York Times, June 12, 1995, D2.

  Rubin said in a public statement: Rubin quoted from Clay Chandler, “Panetta Urges Fed to Cut Short-Term Interest Rates,” The Washington Post, June 12, 1995, A6; Dean Foust, “In a Fix at the Fed,” BusinessWeek, June 26, 1995, 34.

  Greenspan again left contradictory impressions: See Keith Bradsher, “Doubts Voiced by Greenspan on a Rate Cut,” The New York Times, June 21, 1995, A1; John M. Berry, “Greenspan Hints Fed May Cut Interest Rates,” The Washington Post, June 21, 1995, F1.

  On Thursday, July 6: For more information about the FOMC’s discussion, see Board of Governors of the Federal Reserve System, 82nd Annual Report to Congress, May 6, 1996, 149–161.

  He had written articles: See Felix G. Rohatyn, “The Budget: Whom Can You Believe?” New York Review of Books, August 10, 1995, 48–49; Felix G. Rohatyn, “Getting Past the Gamesmanship,” U.S. News & World Report, August 28, 1995, 102.

  On November 30: See Felix G. Rohatyn, “Cut and Be Prosperous,” The Wall Street Journal, November 30, 1995, A20.

  The FOMC met December 19, 1995: For more information about the FOMC’s discussion, see Board of Governors of the Federal Reserve System, 82nd Annual Report to Congress, May 6, 1996, 188–197.