BUSINESSWEEK ONLINE : DECEMBER 4, 2000 ISSUE
BOOKS Greenspan Revealed MAESTRO Greenspan's Fed and the American Boom By Bob Woodward Simon & Schuster -- 270pp -- $25 GREENSPAN The Man Behind Money By Justin Martin Perseus -- 284pp -- $28 At the peak of the global financial crisis in the fall of 1998, Federal Reserve Chairman Alan Greenspan seemed at a loss about what to do. The central bank had just cut interest rates for the first time in 2 1/2 years, but investors had paid this no mind. Stock prices were fluctuating wildly. Bond trading had come to a virtual halt. Nobody, it seemed, wanted to take on any risk. In a rambling, abstruse speech to a group of business economists, Greenspan described the situation as scary and confessed he had never seen anything like it before. Had Greenspan's luck finally run out? Was the economy headed for disaster? No. Just over a week later, he surprised the markets by cutting interest rates again, this time ordering a reduction on his own instead of waiting for the next meeting of the Fed's monetary policy committee. Investors cheered. Stock prices zoomed higher. And the crisis passed. It's thanks to that sort of astute monetary management that the 74-year-old Greenspan has achieved the status of an economic oracle who holds the fate of the U.S. economy in his hands. He has even become a cultural icon, showing up in a cameo role in an episode of the hit television cartoon show The Simpsons. But despite all the attention, Greenspan remains something of a paradox. A onetime acolyte of the late libertarian author Ayn Rand, Greenspan is a staunch believer in free markets and the power of the individual. Yet he has spent much of his career in government, including the past 13 years at the Fed. A self-confessed introvert, Greenspan nevertheless is a regular on the cocktail-party circuit that brings together the capital's movers and shakers--the so-called ''A'' list. He's a self-effacing man who avoids confrontation, yet has prospered in a city known for its publicity-seekers and partisanship. Two new books try to peel away the mystery shrouding the monetary mandarin and explain how his mind works. In Maestro: Greenspan's Fed and the American Boom, the country's best-known investigative reporter, Bob Woodward, offers an inside look at the central bank during the Fed chief's reign, from the stock market crash of October, 1987, up to the prosperous current days. Former Fortune magazine writer Justin Martin reaches back even further in his effort to separate the man from the monetary myth. In Greenspan: The Man Behind Money, Martin provides a well-researched overview of Greenspan's life, from his birth in 1926 through his brief stint as a saxophonist and clarinetist in a jazz band in the 1940s to his present life as the world's premier economic policymaker. Both books reward the reader with a wealth of detail about Greenspan's comings and goings over the years. But in the end, they come up short in explaining the Fed chief's paradoxical personality. Perhaps because it concentrates on Greenspan's time at the Fed, Woodward's book is more interesting. While it doesn't contain any startling revelations--in fact, many of the stories in the book have been told before--it's still replete with the sort of fly-on-the-wall reporting for which The Washington Post assistant managing editor is known. There's then-Treasury Secretary James Baker gloating ''We got the son of a bitch'' after maneuvering Paul Volcker out of the Fed and replacing him with Greenspan. There's Greenspan getting top-secret briefings from then-Defense Secretary Dick Cheney before the Persian Gulf war--briefings that helped him set interest-rate policy. And there's Greenspan phoning conservative radio talk-show host Rush Limbaugh to urge him to back Clinton's 1995 Mexico bailout. As with Woodward's previous books, it's clear that he enjoyed unparalleled access to many of the principal players in this saga, including Greenspan. How else would he know that the Fed chief gets a pain in his stomach whenever he's about to say something that could backfire? But as he has done previously, Woodward likely won that access by agreeing not to identify many sources, leaving it to the reader to guess at the origins of much information. What comes across most clearly in Woodward's book is Greenspan's skill in playing the political power games that determine who survives in the cutthroat world of Washington. It's a skill that Woodward greatly admires--after all, along with Carl Bernstein, the author made his reputation by helping to bring down a President, the late Richard Nixon. Survival skills have allowed Greenspan to outlast three Presidents--Republicans Ronald Reagan and George Bush and Democrat Bill Clinton. Most surprising has been the ability of Greenspan, a lifelong Republican and onetime Nixon adviser, to forge such close ties with Clinton. Woodward replows some of the ground he covered in The Agenda, his best-selling book on Clinton's first year in office, when he describes the key role Greenspan played in persuading Clinton to tackle the bulging budget deficit--all but promising the Administration lower interest rates as a reward. But he also goes further, describing in detail how Greenspan later developed close ties with former Treasury Secretary Robert E. Rubin, forged in part on their shared fear in 1996 that the stock market was dangerously overvalued. That led to Greenspan's now-famous warning that December about the market's ''irrational exuberance.'' Perhaps Greenspan's survival skills have been best displayed in his ability to scuttle any threats to his preeminence at the Fed. Woodward describes how Fed Vice-Chair Alan Blinder felt so undermined by what he perceived as Greenspan's quiet machinations that he decided to leave the central bank. Woodward also hints that Greenspan, together with Rubin, secretly sabotaged Clinton's efforts to appoint financier Felix Rohatyn to succeed Blinder in 1996. But he doesn't dig deep enough to say for sure what happened in either case--a surprising lapse for such a resourceful reporter. As is clear from the book's title, Woodward also gives Greenspan too much credit for the current boom. Sure, the Fed chief has played a critical role in ensuring that the expansion endured. But a host of other factors--including an explosion in the use of information technology--have also been at work, something Woodward seems to give short shrift. Martin's book is more critical of Greenspan. It points out how the Fed chief was wrongheaded about the 1990-1991 recession, even to the point of insisting, months after the downturn had started, that the economy was still on an upswing. And Martin is more even-handed in doling out responsibility for the 1990s boom, perhaps because he lacked the same access to Greenspan. Martin's book is thick with detail on Greenspan's pre-Fed life, making it more suited to close watchers of Greenspan than to casual readers. It describes his early skill with mathematics--he was able to add up three-digit numbers in his head when he was only five. It also details the key part Greenspan played in Rand's ''collective,'' which met regularly to debate libertarian ideas--and the role she played in ''opening his eyes to a moral dimension of capitalism.'' Also chronicled: the success of Greenspan's economic consulting business, his suspicions of Nixon, and his admiration for Nixon's successor, Gerald Ford. At the end of both books, though, the reader is left feeling that something is missing. That may be because the last chapter of the Greenspan saga is yet to be written. He still has to bring the booming economy of the 1990s in for a soft landing and avoid a crash. Only then, perhaps, will we know how Alan Greenspan will be judged by history. By RICH MILLER Miller covers the Fed for BUSINESS WEEK. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Greenspan Revealed PHOTO: Cover, ``Maestro'' PHOTO: Cover, ``Greenspan'' INTERACT E-Mail to Business Week Online

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