House Members Scold Fed Chairman

Here’s a new way to gauge the nation’s economic anxiety: Count the number of pointed exchanges in a congressional hearing with Federal Reserve Chairman Alan Greenspan.

In happier economic times, Greenspan could count on a reverential reception when he ventured to Capitol Hill. But now the economy is sagging, and during the chairman’s testimony to Congress on Wednesday, no fewer than six members of the House Financial Services Committee got crosswise with him.

The very fact that the exchanges occurred was instructive, and they revealed a rare testiness on Greenspan’s part as well.

The trouble started when Rep. Bernard Sanders (I-Vt.), a longtime Greenspan critic, baited the Fed chairman by demanding to know why he opposed raising the minimum wage.

Greenspan answered that he was concerned an increase from $5.15 an hour would cause employers to lay off workers or not hire them in the first place.

“Are you for abolishing the minimum wage?” shot back Sanders.

“Yes,” Greenspan told a surprised panel. “If what I say is correct, then the minimum wage does no good.”

Veteran Fed watchers said after the session they don’t recall the central banker ever publicly endorsing abolition of the minimum wage, which is extremely popular among Democrats and organized labor.

The minimum wage was only the beginning of the trouble. A little later in the hearing, Rep. Marge Roukema, a moderate New Jersey Republican, asked Greenspan how Washington could encourage greater homeownership through tax breaks.

Although the Fed chairman was more cautious, he made it clear he didn’t think much of the idea. “It’s important to recognize that we’re not doing a bad job on housing. . . . We have to say that the data are not bad.”

Greenspan has suggested in the past that he thinks the government is doing too much to subsidize homeownership through the mortgage interest rate deduction and other means. But his comments Wednesday proved a lightning rod for lawmakers, especially Democrats.

“Many people on this committee, many members [of Congress] believe there is a housing crisis. There certainly is a housing crisis in California,” said Rep. Maxine Waters (D-Los Angeles). “I’m very surprised at your description of housing and at the fact that you believe it is doing well.”

Only 2% of conventional mortgage loans in California went to African Americans, said Rep. Barbara Lee (D-Oakland).

But “based on your view of the world,” she asked pointedly, “should we really assume that the Federal Reserve will not consider economic strategies to stimulate homeownership, especially for those making $40,000 or less?”

“No,” Greenspan responded, Washington should help lower-income families buy homes, but it can do that most effectively by improving their living standards.

“But if you don’t support increasing the minimum age,” Lee said, how do living standards improve?

Greenspan responded by repeating his argument about the minimum wage, but no sooner had he finished than Rep. Stephanie Tubbs Jones (D-Ohio) asked him a nearly identical question.

“Let me ask you this,” a seemingly irritated Greenspan replied. “If you raise the minimum wage and [people] lose their jobs as a consequence, does that help them?”

“Mr. Greenspan, that’s fear tactics,” Tubbs Jones said. “But don’t ask me a question. You answer my question.”

Observers said such a biting exchange would have been unheard of even a year ago when Greenspan was being hailed as a genius for orchestrating the longest period of prosperity in the nation’s history.

But that was before Americans began worrying that the good times may be coming to an end.