Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (9 page)

Mr. Greenspan Escapes from New York

Greenspan’s Washington tour may have been a welcome opportunity to escape New York—he was one of more than 1.1 million New Yorkers who emigrated from the city in the early 1970s.
¹⁵
Many companies fled the cities for less expensive headquarters, reversing the trend that had begun in the 1950s. By 1960, New York was the world’s financial capital, and much of the building over the next decade was to accommodate finance.
¹⁶
But between 1968 and 1970, 18 major corporations left New York and 14 more announced plans to leave.
¹⁷
The wave was just beginning. The financial companies generally remained in New York City. They could afford to.

¹¹
David Frum,
How We Got Here: The 70’s; The Decade That Brought You Modern Life (for Better or Worse)
(New York: Basic Books, 2000), p. 25.
¹²
Ibid.
¹³
Ibid., p. 21.
¹⁴
National Association of Homebuilders; www.nahb.org; Source: U.S. Census Bureau,
Table C-25.
¹⁵
Robert A.M.Stern, Thomas Mellins, and David Fishman,
New York 1960: Architecture and Urbanism between the Second World War and the Bicentennial
(New York: Monacelli: Press, 1995), p. 32.

Life in New York is often an exaggeration and distortion of life across America. But the texts and subtexts wearing down the nation’s largest city were to define the retrenchment that evolved across America through the new millennium: production in decline; fancy finance to the forefront; the ascendancy of showbiz; the perpetual craving for entertainment and shopping; sloppy workmanship; quantity over quality; less tangible and more insecure jobs in increasingly cramped, colorless, and utilitarian offices; the rush to the suburbs for a more comfortable and affordable life, then to the exurbs when the suburbs compromised these ambitions; and the requisite obsession to make money fast enough to stay on the treadmill. By the mid1970s, New York resembled a third-world capital, like Johannesburg or Rio, with some rich and more poor and with tension arising from transit strikes, garbage strikes, and newspaper strikes.

Mr. Greenspan Goes to Washington

It was Alan Greenspan’s turn at bat. On August 8, 1974, he appeared before the Senate Banking Committee. (This happened to be the same day Richard Nixon announced his resignation from office.) Greenspan’s Council of Economic Advisers grilling was unremarkable other than over 40 minutes of questioning by Senator William Proxmire, during which the senator “let rip.”
¹⁸
Proxmire voted against Greenspan’s nomination.

By the time Greenspan moved to Washington, “stagflation” (inflation and recession at the same time) was gripping the country. To read the press of the day, Greenspan was magnificent. Whatever the case, his true brilliance was managing his image. He received lengthy profiles in
BusinessWeek
and the
New York Times Magazine
. By early 1975, a “top White House official” told
BusinessWeek
, “Greenspan has a unique personal relationship with the President. Alan was the only top aide to spend the entire time [at Gerald Ford’s retreat] in Palm Springs during the Easter vacation.”
¹⁹
The official went on to say that “[on] economic policy, Alan is a heavyweight.”
²⁰
This was high praise—especially since he didn’t hold a position with tangible responsibility. According to the
BusinessWeek
profile: “Greenspan spends much of his time screening economic information to determine what gets to the President, and the quality of the material is considered ‘first rate’ by White House insiders.”
²¹

¹⁶
Ibid., p. 62.
¹⁷
Ibid., p. 65.
¹⁸
Martin,
Greenspan
, pp. 91–93.

The insiders’ judgment may have been sincere, but the CEA director’s performance is difficult to evaluate. For instance, Greenspan’s aptitude achieved a pinnacle in a November 1974
New Yorker
analysis, in which the magazine claimed that “economists of all persuasions (with the exception of Alan Greenspan, an Ayn Rand disciple, who heads the President’s Council of Economic Advisers) admit to being baffled by today’s problems, the answers to which are not to be found in textbooks or in historical precedents.”
²²
The logic seems to run that since Greenspan was trained by Rand, he understood all. What “all” might comprise is not divulged by the
New Yorker
and apparently not by Greenspan, since the befuddled remained so.

BusinessWeek
readers learned that “Greenspan’s special skill as an economist is his ability to quickly recognize the changes occurring in the economy, to understand their significance, and to make the necessary adjustment. Such skills, which Greenspan honed to a fine edge as private consultant to the top executives of about 100 of the country’s biggest corporations, were particularly important in recent months when the economy was collapsing with bewildering speed.”
²³
From the same story, Greenspan “emerged as the economist Gerald Ford listen[ed] to most often. He [had] done this through a combination of integrity, charm, pragmatism and just plain brains.”
²⁴
One might think Greenspan wrote the article himself.

¹⁹
“Soft-Sell Charm,”
BusinessWeek
, April 28, 1975, p. 2.
²⁰
Ibid.
²¹
Ibid.
²²
Richard H. Rovere, “Letter from Washington,”
New Yorker
, November 4, 1974, p. 170.
²³
“Soft-Sell Charm.”
²⁴
Ibid.

Confirmation of his skills flowed from all quarters. Richard Cheney was President Ford’s chief of staff. He claimed that the president attached “more weight to Greenspan’s views than to those of any other among his economic advisers.”
²⁵
Yet the public record calls Greenspan’s skills as an economist into question. On September 5, 1974, the day after he was sworn in as CEA chairman, Greenspan announced: “We are not about to get a dramatic decrease in economic activity.”
²⁶
With this knowledge, he urged President Ford to propose a tax surcharge—an effort to halt inflation. This was exactly the wrong time for such a tactic (which was passed into legislation). The economy contracted 5.8 percent from mid1975 though.
²⁷
(It probably goes without saying that raising taxes for any reason was anti-Randian.)

In April of 1975, at the time
BusinessWeek’s
glowing profile was published, Greenspan pronounced to a New York audience that the worst was yet to come, when, in fact, the worst had passed.
²⁸
According to the National Bureau of Economic Research, the recession ended in March of 1975.

Taking together Greenspan’s January 7, 1973, advice that “[i]t’s very rare that you can be as unqualifiedly bullish as you can now” (stated four days before the stock market commenced its 46 percent plunge) and his prediction that the worst was yet to come in April 1975 (when it had ended during his shuttle flight to New York), his public declarations validate the opinions of his former (and future) clients who found him so unenlightening.

In the fall of 1974, Greenspan was involved in the “Whip Inflation Now” marketing campaign. Participants wore WIN buttons to battle a foe that had already, at least temporarily, diminished as the leading economic problem.
²⁹
(Consumer price inflation fell 90 percent from the fourth quarter of 1974 to the first quarter of 1975.
³⁰
)
In the spring of 1975 Greenspan backed a tax cut. The man who pontificated against government’s ability to adjust economic policy had now proposed both a tax
increase
and a
decrease
within six months—to calibrate the economy. If Ayn Rand was watching, she may have thought she was back in the country from which she had escaped—the Soviet Union.

²⁵
Joseph Kraft, “Right, for Ford,”
New York Times Magazine
, April 25, 1976.
²⁶
Ibid.
²⁷
Ibid., growth rate of 5.8 percent from David E. Runkle, “Revisionist History: How Data Revisions Distort Economic Policy Research,”
Federal Reserve Bank of Minneapolis Quarterly Review
, Fall 1998, pp. 3–12.
²⁸
Kraft, “Right, for Ford.”
²⁹
In his autobiography, Greenspan claims the WIN Compaign was “unbelievably stupid.” This was a surprise to some who remember a highly engaged CEA adviser.
³⁰
Ibbotson Associates,
Stocks, Bonds, Bills and Inflation, 2000 Yearbook, Market Results for 1926–1999
, 2000, p. 226, Table A-15.

In 1975,
BusinessWeek
noted that “Greenspan has a reputation for being able to get along with just about everybody, including those with whom he may have serious differences.… This combination of charm and solid analytical skill” has given Greenspan the ability to capture “the ear [and possibly] the mind of the President.”
³¹
L. William Seidman, a senior aide to Ford when he was vice president, may have understood the strange dynamic best—that Greenspan was aloof yet cordial: “He has the best bedside manner I’ve ever seen. He’s very non-confrontational, but also very good at persuading people. Part of his mystique, I think, is he’s hard to understand, but that also gives him a certain genius aspect.”
³²
Seidman interviewed Greenspan prior to the CEA offer: “He assured me he was pure economist and not politician. It turned out he was a better politician than any of us thought.”
³³

Greenspan in Hollywood

In a lengthy
New York Times
profile, Joseph Kraft described a typical day in the life of a CEA chairman: “He spends about as much time in the White House as he does in his council offices, once acknowledging that even swearing-in affairs at the White House were useful because they provided one a chance to be close to the President.”
³⁴
And a chance to impress new members of the administration with his integrity, charm, and brains.

By the 1970s, politics and publicity were merging. Washington drifted toward the rhetoric of Hollywood.
People
magazine was launched in 1974 and immediately poached
Time
magazine’s readers. This was no surprise to the latter.
People
was published by Time Inc. as a spin-off from the “People” page in
Time
. The parent company pledged to “[get] back to the people who are causing the news and who are caught up in it, or deserve to be in it. Our focus is on people, not issues.”
³⁵
Participants in national issues understood that their public image was becoming as important as—maybe more important than—the policies themselves. A drawing of Secretary of State Henry Kissinger on the April 1, 1974, cover of
Time
is laid out under the title: “How Henry Does It.” The very first paragraph in the cover story notes that he had “the unmistakable aura of a true celebrity” when recently in Moscow.
Time
noted, “Arab sheiks [are] fascinated … by the machismo image of his well-publicized dates with actresses Jill St. John and Marlo Thomas.”
³⁶
Subscribers to
Time
may have wondered if they received the wrong magazine.

³¹
“Soft-Sell Charm”.
³²
John Cassidy, “The Fountainhead,”
New Yorker
, April 24, 2000, p. 173.
³³
Ibid., p. 172. Seidman was later head of the Federal Deposit Insurance Corporation and the Resolution Trust Company, and was a commentator on CNBC.

Greenspan’s “bedside manner” went a long way in fulfilling his successful tenure at the CEA. Washington politics is chock-full of egotists, exhibitionists, dramatists, and ladder climbers. To most such domineering characters, the CEA chairman’s demeanor looked inauspicious. Joseph Kraft wrote: “Everyone who has worked with Greenspan seems struck by his lack of ego, his unconcern with machismo, his disposition to emphasize his subject more than himself. Precisely because of his lack of pretension, hardly anyone has any difficulties working with him.”
³⁷

Precisely because he appeared beneath competition, Greenspan successfully controlled situations that were well outside the CEA’s authority. For example, he worked wonders in coordinating the administration’s 1975 grain deal with the Soviet Union. The departments of State, Treasury, and Agriculture were the responsible parties. Secretaries Henry Kissinger (State), William Simon (Treasury) and Earl Butz (Agriculture) were strong-willed men. Nevertheless, Greenspan maneuvered himself into a negotiating role, and the Soviet grain deal of 1975 was struck: “[A] far better one than the 1972 agreement, which drove prices up.”
³⁸
This, at least, was the opinion Alan Greenspan stated to the
New York Times
; according to the
Times
, Greenspan took no credit for himself.
³⁹

³⁵
Time
, March 1974.
³⁶
“Superstar Statecraft: How Henry Does It,”
Time
, April 1, 1974.
³⁷
Kraft, “Right, for Ford.”
³⁸
Ibid.
³⁹
Ibid.

Magazine Covers and the Party Circuit

In 1975, Greenspan shone from the front cover of
Newsweek
, the first time an economist was thus celebrated. Other 1975 honorees included Jimmy Hoffa, Patty Hearst—and Henry Kissinger.
⁴⁰
The publicity industry hounded Greenspan. Autograph seekers mailed him copies of the magazine to sign. (He obliged.)
Penthouse
asked for an interview. (He declined.)
⁴¹

When he was not evading
Penthouse
, the chairman hit the party circuit. It appears this was difficult for him. The
Washington Post
social columnist labeled him a “social creeper”: he “creeps through the most densely populated islands of a room saying, ‘Pardon.’”
⁴²
Whatever embarrassment Greenspan may have suffered, he persevered, and he might have echoed Cary Grant’s self-analysis: “I pretended to be somebody I wanted to be and I finally became that person. Or he became me. Or we met at some point.” Despite his hesitancy, he did the right thing and dated Barbara Walters, the television hostess to the good and the great. This gave him cachet in the social columns. He would later date Susan Mills in the 1980s, a producer for the
MacNeil-Lehrer Newshour
, and then married Andrea Mitchell, a political correspondent on NBC television.