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To those who criticize him for having been too accommodating to the White House, Greenspan can say it has not always brought him peace. Indeed, the Fed had to spend much of last winter fending off a proposal by Treasury Secretary Lloyd Bentsen that would have created a superagency to regulate banks and thus usurp much of the Fed's supervisory authority. (The original plan is virtually dead.) Greenspan has also had to contend with some of Congress's most powerful members, who have long chafed at the secretive behavior of the Fed and in the past year have drafted legislation that would require the central bank to release promptly the transcripts of its rate-setting meetings.
In this context, Greenspan's close relationship with the Clinton Administration, which burst into the spotlight with his now famous appearance beside Hillary Rodham Clinton at the President's first address to a joint session of Congress in February 1993, has turned out to be useful. "Both sides need each other," says Felix Rohatyn, a partner at the investment firm Lazard Freres. "The Administration benefits from the reflected cachet of a conservative Republican like Greenspan, whose job is made easier by the deficit-reduction policies and fiscal prudence that Clinton has so far demonstrated." Besides the saxophone, both men have in common a love of policy and statistical minutiae: if Clinton can cite the number of medically uninsured workers in most of the 50 states, Greenspan is said to follow how many freight cars are loaded in Texas. Their first preinaugural conversation lasted more than four hours.
Since then, Greenspan has gone out of his way to keep the White House informed, at least in general terms, about the Fed's monetary moves. While policy differences limited contacts between Greenspan and the Bush White House, the Fed chairman met at least four times with Clinton last year and has so far held two closed-door meetings with the President in 1994. On Jan. 21, for instance, Greenspan indicated to Clinton and his top advisers that the Fed was planning a small increase in interest rates as a pre-emptive strike against inflation. While Clinton expressed an understanding of Greenspan's position, he said he hoped that raising short-term rates would not jack up long-term rates as well -- and that proved to be exactly what happened. A second Clinton-Greenspan meeting on March 18 embarrassed both sides when the Fed chairman abruptly canceled a scheduled speech to attend the session and word of it leaked out. News of the meeting, during which Greenspan again explained his thinking to Clinton in general terms, helped rattle the markets when the Fed boosted interest rates on March 22. "Greenspan might have warned us that he'd have to cancel a public appearance in order to come to the White House," says an Administration official. "If he had, we could have avoided much of the overheated reaction from the markets and the press."