Keep the Steady Hand
President Clinton’s decision Tuesday to reappoint Alan Greenspan as Federal Reserve chairman six months before his four-year term expires was the right move at the right time. The jittery capital markets dropped sharply--the Dow shedding 360 points and Nasdaq 230 points--the result not only of fear of interest rate hikes but also of early-in-the-year investor profit-taking. Despite the stock market reaction, Greenspan has conducted the Fed’s monetary policy with a deft hand. His early reappointment will provide the markets much-needed continuity. The Senate should give Greenspan a speedy confirmation.
America’s central banker since 1987, Greenspan has presided over nearly a decade of economic expansion. To those who believe that he single-handedly engineered the country’s growth, he has become an economic indicator himself, capable of moving the markets with a single oblique statement. His detractors endow him with the power to hurt the economy with testimony before Congress, and his critics are many.
Worth magazine blamed him in a front-page story for popping the bond bubble that cost Orange County $2 billion in 1994. Greenspan was said to have accomplished that by “mistakenly” raising interest rates to fight phantom inflation. Just two months ago, when bond prices dropped sharply, traders blamed him for doing exactly the opposite--failing to raise interest rates in time to combat what the rest of Wall Street sees as imaginary inflation.
The 73-year-old banker has not created America’s economic boom. The millions of American workers and their earnings have done that. Nor is he responsible for the huge losses suffered by those guessing wrong on interest rate movements. Those most wrapped up in what he says about stocks tend to fault him for his “dangerous” liaison with Wall Street.
Yet Greenspan does deserve credit for guiding the nation’s monetary policy with a firm hand, keeping inflation down and reacting swiftly and decisively at times of crises. He also deserves praise for guarding the Fed’s independence from political pressures in Washington.
Greenspan clearly loves his job; not the spotlight he is being thrust into but the challenge of putting to work the broad economic concepts and models that sustain the “dismal science.”
The renomination of Greenspan has broad, if not universal, backing among the presidential hopefuls. He should be confirmed before his nomination gets entangled in electoral politics.
