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Despite such miffed feelings, Greenspan and the Clinton camp have remained on friendly terms. Speaking at an electronic town hall in Charlotte, North Carolina, last week, Clinton blamed the volatile financial markets on what he called "an overreaction to what the Federal Reserve did." And Greenspan, who last year praised Clinton's deficit-reduction policies for improving the country's long-term economic outlook, last week told a San Francisco audience that the outlook remains strong. "Most people think that Greenspan is generally in the same mind-set as we are," says a member of the Clinton economic team. "There's a basic agreement on principles."
Yet that hardly kept Greenspan from having to marshal his political cunning to defend himself against the Treasury's bid for a banking superagency. He deployed a full-time lobbyist, dropped in on members of Congress to attack the plan, and dispatched senior Fed officials to spread the word among important bankers that the Treasury plan was ill-advised. Among other things, the emissaries reminded bankers that the Fed had handed out loans to keep floundering financial institutions afloat in the late 1980s. And the banks needed no reminders that the Fed can deny them permission for acquisitions and ( mergers. Meanwhile, the Treasury was lobbying too. "It was a basic conflict of interest," says a Washington lawyer who witnessed the Fed campaign. "But it had the desired impact."
Greenspan has used subtler tactics to parry thrusts by Congressmen like Henry Gonzalez of Texas, who chairs the House Banking Committee. First, Clinton dampened support for the Texan's proposals for more Fed openness by sending him a letter last September opposing any fundamental changes in the Federal Reserve Act. Then Greenspan sought to outflank Gonzalez in February and March by taking the unprecedented step of announcing the rate hikes the same day the Fed decided to enact them.
Such adroitness comes naturally to a Fed chairman who has been in political training all his life and has managed to serve an extraordinary number of masters. A former student of the Juilliard school of music and a disciple of libertarian thinker Ayn Rand, Greenspan first entered politics as a domestic adviser to Richard Nixon's 1968 campaign and rose to hold key economic posts under five Presidents. He suffered his greatest embarrassment in 1985 when, as a private economist, Greenspan wrote letters to regulators and Congress endorsing Charles Keating and his Lincoln savings and loan. Lincoln subsequently collapsed at a cost to taxpayers of $2.6 billion, and Keating landed in jail.
Greenspan succeeded Paul Volcker as Fed chairman in 1987. Experts give him high marks for providing ample credit to the financial community and thereby helping overcome disasters ranging from the crash of '87 to the near collapse of the banking industry when it was saddled in the late 1980s with bad real estate loans. Notwithstanding his bookish appearance, Greenspan has long been a fixture on the Washington cocktail circuit, where he has squired such high- profile and politically connected companions as ABC newswoman Barbara Walters and NBC correspondent Andrea Mitchell.