Business leaders and politicians have been complaining for months that the Federal Reserve's high-interest-rate policy could push the U.S. into a recession, but Federal Reserve Chairman Alan Greenspan has steadfastly maintained that rates must be kept up to hold inflation at bay. Last week Greenspan blinked. In testimony before the Senate Banking Committee, he acknowledged for the first time that many banks are causing a credit crunch by being overly stingy in granting loans. As a result, Greenspan said, the Federal Reserve may act to "offset" the credit tightening by engineering a "modest" drop in interest rates.
On Wall Street, investors...
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