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

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Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession Page 42

by Frederick Sheehan


  123, 125

  Federal budget deficit, 77, 84,

  113, 126

  Federal Deposit and Insurance Commission (FDIC), 78–79, 294 Federal Home Loan Bank (FHLB),

  86–87, 91

  Federal Housing Authority (FHA),

  272–273

  Federal (Reserve) Open Market Committee (FOMC), 40, 344 and 1990s stock market bubble,

  161–162, 170–172, 174–178,

  192–194, 196, 200, 205–206,

  212, 225, 285

  1995 decisions of, 136–143

  and 1998 rate cuts, 187–189 and 2000–2001 economic

  slowdown, 231–234,

  238–245, 249

  composition of, 367

  and consumer debt‘, 251–257 Greenspan’s control of, 137

  and LTCM failure, 184–186

  and margin requirements, 220 and productivity claims, 157–160 rate changes by, 368

  and recession of early 1990s, 122,

  123, 128–130

  and subprime market of 1990s, 166 Y2K discussions in, 210–211 Federal Reserve Act (1913), 367 Federal Reserve Board:

  and 1987 stock market crash, 112 Burns as chairman of, 13,

  40, 66n.25

  chairmen of, 362

  and changes in CPI, 50

  diminished influence of, 104 dissolution of, 359

  Eccles, as chairman of, 20

  economic growth mandate for, 23–24

  and “the Great Impoverishment,” 358–359

  Greenspan as chairman of,

  104–107

  Greenspan’s control of, 137–139 Greenspan’s early views of, 14, 28, 66n.25

  Greenspan’s nomination hearing for, 95–102

  and inflation of 1970s, 48–49 and inflation of late 1960s, 39–40 interest rates set by, 66 (See also Fed funds rate)

  and margin requirements (stock market), 104, 105, 161, 175, 219–220, 223, 286

  Martin, as chairman of, 20, 40 McCabe, as chairman of, 20n.5 Miller, as chairman of, 66n.25 at mid-century, 20–22

  and monetary base, 134, 216, 248 and money supply, 4, 351, 352, 362 Patman’s threats against, 65

  power and prestige of, 115–116 and recession of early 1990s, 122–126, 128–132

  Volcker as chairman of, 66, 82, 95 and Wall street collapse of 2008, 345 Federal Reserve System, 224, 367–368 Feldstein, Martin, 239

  FHA (Federal Housing Authority), 272–273

  FHA mortgages, 273, 277

  FHLB (see Federal Home Loan Bank) Fidelity Investments, 130

  15 Central Park West, 356–357 Financial activities:

  in the 1980s, 71–72

  and commercial bank bailouts, 78–79

  during conglomerate years, 33–36 innovation in, 124

  junk bonds, 80–81

  leveraged buyouts, 80

  profits from, 3

  Financial concentration, in banking industry, 100–101

  Financial derivatives, description of, 109–112, 130–131, 276,

  313–314

  Financial institutions, Fed bailouts of, 115

  The Financial Services

  Modernization Act (see GrammLeach-Bliley Act (1999))

  Financial system:

  in the 1980s, 7

  1994 deleveraging of, 128–129 1995 inflation of, 136–137

  Proxmire’s fears for, 6

  Financial Times, 192, 217, 242, 244,

  313, 322, 328, 332, 345, 347 First Alliance Corporation, 274 Fixed-rate mortgages, 292

  Fleet Financial, 130

  FLEX-ARM mortgages, 289

  FOMC (see Federal (Reserve) Open Market Committee)

  Forbes, Malcolm, 74

  Ford, Gerald, 5, 47, 52–54, 69, 70 Ford Motor Company, 51, 246 Foreign buying:

  dollar supported by, 308–310 of mortgagebacked securities, 272 Fortune magazine, 3, 4, 13, 23, 24,

  29, 34, 37, 51, 144, 191, 334,

  349, 351

  Frank, Barney, 268

  Freddie Mac Corporation,

  266–269, 272, 279, 309,

  310, 347n.48

  Freemarket economics, 15

  Friedman, Milton, 21, 37, 42, 68,

  288–289, 299, 354

  Fritts, Steve, 294

  FTSE (Financial Times Stock Exchange), 246

  Fuld, Richard “Dick,” 274, 354 Futures Industry Association, 189–190

  G

  Galbraith, James K., 327

  Galbraith, John Kenneth, 66n.25, 361 Garment, Leonard, 31–32

  Gates Commission, 36, 37

  GDP (see Gross domestic product) Geithner, Timothy, 79, 277, 361 General Electric Corporation, 183,

  364–365, 306

  General Motors Corporation, 51,

  112, 123, 127, 246

  General Motors Acceptance

  Corporation, 306

  GeoCities, 174

  George Washington High School, 10 German central bank (Bundesbank),

  49, 308–309, 351

  Getz, Stan, 10

  Glassman, James K., 198, 207, 243,

  284–285

  Glass-Steagall Act (1933), 101, 102,

  275–276

  Glenn, John, 85

  Global Crossing, 248

  “Global savings glut,” 310

  TheGlobe.com, 191–192

  Goebbels, Joseph, 218n.11

  “Gold and Economic Freedom” (Alan Greenspan), 28–29, 45–46, 47,

  115, 205, 286, 352, 362

  Gold prices, 41, 66

  Gold standard, 1, 5, 21–22, 27, 28–29,

  38, 41, 47, 62, 115, 124, 305–306,

  362–363,

  “gold exchange standard” (see also Bretton Woods), 22, 38, 41, 47,

  49, 305–306, 362n.5

  Goldberger, Paul, 357

  Goldman Sachs, ix, 96, 174, 232, 272, 276, 283, 310, 321, 322, 347n.48, 354, 356

  Gone with the Wind (Margaret

  Mitchell), 315

  González, Henry, 115

  Gordon, Robert J., 230

  Gore, Al, 323

  Government agency securities, 309–310

  Gramlich, Edward “‘Ned,” 178, 188, 259–260

  Gramm, Phil, 163, 217, 245, 322 GrammLeach-Bliley Act (1999), 275–277

  Grant, Cary, 47, 57

  Grant, James, 118, 125, 195, 314 Gray, Edwin, 91–93

  Great Depression:

  Greenspan’s analysis of,

  28–29, 205

  and money supply, 352

  “The Great Impoverishment,” 358–359

  Greenspan, Alan:

  and 1987 stock market crash, 103–104, 112–114

  and 1990s stock market bubble, 160–164, 170–178, 191–210, 219–225, 285–287

  and 1990s subprime market, 164–166

  and 1995 funds rate cuts,

  139–141

  and 1998 rate cuts, 187–189 and 2000–2001 economic

  slowdown, 224–225, 237–249 2007–2008 speaking tour of, 341–344

  and analysts, consistent-bias theorem, 197, 199, 201

  and analysts, upward bias of forecasts, 202, 203, 209,

  232, 284

  and (Wall Street) analysts, 29, 175,

  177–178, 193, 194, 195, 196, 198,

  199, 200, 201 n.35, 203, 204, 209,

  218, 231n.16, 232, 233, 235, 239,

  243, 244, 284

  and asset inflation (vis-à-vis price inflation), 4, 16, 25, 28, 65, 106,

  170, 171, 175, 176–177

  awarded, American Hero of

  2007, 329

  awarded, Department of Defense Medal for Distinguished Public Service, 297

  awarded, Enron Prize for

  Distinguished Service, 248,

  284, 297

  awarded, Knight Commander of the British Empire, 297

  awarded, Order national de la Legion d’honneur, 297

  awarded, Presidential Medal of Freedom 297

  after retirement, 301–304

  Americans’ feelings
about, 104,

  144, 164, 195, 203, 245, 243,

  337–338

  on asset inflation, 359

  autobiography of, 154, 187, 303,

  337–341,

  and bubbles, states he (and Federal Reserve) has and can pop

  bubbles, 128–129, 139–140, 161 and bubbles, states Federal Reserve cannot pop bubbles, 192–195,

  203–205, 225, 228, 261, 285–286 on bubbles, 192, 203–204, 285,

  349–350

  campaign for Fed chairmanship,

  82–83

  debt, refers to as “wealth,” 2, 99,

  107, 258, 260, 290

  during Carter presidency, 60–67 character and personality of, 3, 14,

  15, 27, 193, 211–213

  and consumer debt, 254, 258, 261 and corporate management earnings bias, 235

  control of FOMC/Federal Reserve by, 137–139

  on Council of Economic Advisers, 5, 47, 50, 52–57

  on credit default swaps, 315–316 and derivatives, 102–105, 110, 113, 128, 130–131, 182, 189–190, 206, 276, 312, 314, 343, 346

  dissolution of Townsend

  Greenspan, 102

  early life of, 2, 9–10

  economic forecasts by, 3, 6, 13, 16–17, 25, 43, 54–55, 97–98, 119 education of, 3, 10–13, 59–60 and presidential election of 1980, 67–70

  as Fed chairman, 6–7, 104–107 Fed nomination hearing for, 95–102

  and financial institution

  bailouts, 115

  “Gold and Economic Freedom,” 28–29, 205, 286, 352, (see additional pages under “Gold and Economic Freedom”) on gold standard, 362–363

  and housing market, 254,

  259–263

  image presented by, 2, 52–53, 60, 61

  infamous speeches of, 284–286, 289–299

  on inflation, 4, 5, 45–46, 48

  on investment, 350–352

  legacy of, 365

  and Lincoln Savings and Loan, 6–7, 85–93

  on liquidity boom, 331

  and LTCM failure, 181–187, 189 marriages of, 13, 57

  and Mexico bailout, 135–136 Greenspan, Alan: (Cont.)

  and models, 17, 175, 176, 177,

  189, 206, 234, 240, 241–242,

  260, 270, 285, 297, 304, 344,

  345, 347, 348

  and mortgage market, 266–269,

  275–278, 280

  on National Commission on Social Security Reform, 83–84

  and New York City, 2, 5, 9, 22,

  51–52, 57, 73–76, 353–354 during Nixon administration, 32,

  36–37

  and Objectivism, 14–15, 27, 32 open-mouth policy of, 227–235 at Paulson & Co., 345

  peer reviews of, 38–39

  political influences on, 115–116 political involvement of, 5, 31–32 on possible recession in 2007,

  327–329

  pre-government career of, 3, 13,

  16–17, 33, 42

  on price inflation, 351

  and productivity, 145–146,

  151–155, 157–160, 166–167,

  171–173, 194, 218, 223–224,

  225, 229, 231, 235, 241, 242,

  249, 258

  as public figure, 3, 5, 6, 24–25,

  42, 52–53, 55–57, 72, 74–76,

  227–228, 236, 297, 354

  during Reagan presidency, 73 reappointment of, 122–123,

  142–144, 216–217

  and recession of early 1990s,

  117–119, 121–123, 127–131 retirement of, 299–300

  self-justification by, 340–348 on shorting the dollar,

  316, 317

  success of, 1, 56, 60, 61, 83,

  118–119, 144, 195, 196, 243,

  297, 299–300

  as superstar in early 2000, 213–216, 222–224

  “Technology and the Economy” speech, 218

  Volcker supported by, 82

  and Y2K, 210–211, 215

  Greenspan, Herbert, 9–10

  Greenspan, Rose, 9

  Greenspan Doctrine, 106, 193–204, 298, 354

  “The Greenspan Fed,” 137–139 Greenspan O’Neil Associates, 98 “Greenspan put,” 79, 106, 189, 249 Greenwich, Connecticut,

  323–324, 357

  Greif, Lloyd, 319

  Gross domestic product (GDP), 234–235

  in 1999, 230

  in 2006, 325

  debt required to produce, 310 in early 2000s, 291

  and housing prices, 261

  infatuation with growth of, 320 Grove, Andy, 242, 243

  Grubman, Jack, 233, 244

  Gulf Broadcast Company, 88

  Gulf Times (Qatar), 347

  Guynn, Jack, 261

  H

  Habibie, B. J., 172

  Hadfield, Tom, 221–222

  Half.com, 217

  Halfway, Oregon, 217

  Harvard Business School, 81, 222 Harvard University, 12, 24,

  26, 143

  Harvard Corporation, 323

  Hassett, Kevin A., 198, 207, 243,

  284–285

  Hatzius, Jan, 283–284

  HCA (Hospital Corporation of

  America), 317

  Hedge funds, ix, 4, 125, 130, 181–182, 185, 187, 189, 271, 272, 301, 303, 305, 313, 315, 317, 319, 321, 322, 323–324, 332, 334, 345

  in 2006, 313, 321–324

  average pay in, 323

  lack of regulation of, 187

  (See also specific companies)

  Heller, Walter, 26, 39, 42, 61

  Hendrix, Justin, 222

  Henry Jerome and His Orchestra, 10 Hewlett-Packard, 207

  Heym, Gregory, 356

  Hickey, Fred, 206–207

  HighTech Strategist, 206–207

  Hillsborough Holdings

  Corporation, 117

  A History of Interest Rates, 359

  Hoenig, Thomas, 192

  Home equity loans, 106, 260–262,

  289, 290

  Hormats, Robert, 96

  Hospital Corporation of America

  (HCA), 317

  House prices, 298

  from 1997 to 2002, 289

  in 1970s, 63

  in 2004–2005, 289–294

  in 2006, 325

  and appraisal fraud, 280

  bubble in, 333

  and calculation of CPI, 150–151 in California, 293

  and consumption, 310

  and home equity loans, 290 and household wealth, 260

  in New York City, 356–357

  House sizes, 22, 51, 358

  Household income:

  in 1973, 36

  in 2001, 266

  in 2007, 36

  in early 1990s, 127

  Household wealth, 258, 260, 265 Housing market, 63, 250–263, 296–297

  in 2004–2005, 293–295

  in Arizona, 357–358

  bubble in, 245, 261, 313, 333, 343

  Greenspan’s elevation of, 106–107

  Greenspan’s prediction about, 316

  in New York City, 356–357

  (See also Mortgages)

  HSBC Mortgage Services, 328 Humana Incorporated, 80

  Huntington, R. W., Jr., 221

  I

  I/B/E/S (see Institutional Broker’s

  Estimate System)

  IBM (International Business

  Corporation), 207

  Ideal Leasing, 35

  Immelt, Jeffrey, 306

  Implode-O-Meter Web site, 328, 334 Independent (London), 328

  Inflation, 1–2

  in 1950s, 4

  in 1960s, 39

  in 1970s, 5, 41, 43–46, 48–51,

  62–63

  asset, 321, 343, 359

  of asset prices in late 1990s, 170 Boskin Commission study of,

  146–149

  and calculation of CPI,

  147–152, 155

  in credit, 173

  of financial system in 1995,

  136–137

  Greenspan’s understanding of,
4 in housing market, 261

  Martin’s battle against, 23–24 and the middle class, 355

  need for, 287–288

  in New York City housing market,

  356–357

  political influences on, 116

  Inflation (Cont.)

  price, 350–351

  understandings of, 170

  verbal, 63–64

  ING Bank, 342

  Initial public offerings (IPOs), 141,

  174 (See also specific companies) Inskeep, Steve, 343

  Institutional Broker’s Estimate

  System (I/B/E/S), 197, 200, 233 Insurance, portfolio, 110–112

  Integrated Resources, 117

  Intel Corporation, 177, 207, 216,

  235, 248

  Interest rates:

  in 1980s, 72

  in 1990s, 169

  and consumption expenditure, 298 decline in, 262

  and global crisis, 338

  and house prices, 260

  and leveraging, 126

  over the past two decades, 359 and recession of early 1990s,

  123, 126

  and savings and loan

  problems, 86

  zero or negative, 259

  (See also Fed funds rate)

  Interest-only mortgages, 107

  International banking crises, 311 International monetary system,

  37–38

  Internet, 141–142, 196

  Internet companies, 10, 216, 217 Investment bankers, average pay of,

  323, 355

  Investment banks, 124–125, 165 IPOs (see Initial public offerings) Irrational exuberance, 105, 160–161,

  163, 240

  Irvine, California, 86, 90, 165,

  274, 279

  IT innovations, 199

  J

  J. P. Morgan (see also J.P. Morgan Chase) 6, 73, 83, 93, 100, 101, 182, 185, 275

  Jackson, Alphonso, 272

  Jayhawk Acceptance

  Corporation, 165

  James, Clive, 337

  Jenrette, Richard, 33

  Johnson, Edward C., II, 1

  Johnson, Hugh, 329

  Johnson, Jim, 275

  Johnson, Lyndon, 27, 29, 39

  Jones, Edward N., 278

  Jones, Paul Tudor, II, 324

  Jordan, Jerry, 170, 171, 175, 176, 193

  JP Morgan Chase (see also J.P. Morgan), 274, 346

  Juilliard School, 10

  Junk bonds, 72, 80–81, 89, 93

  Just-in-time inventory

  management, 159

  K

  Kaufman, Henry, 220–221

  Kavesh, Robert, 11, 59

  Keating, Charles, 6–7,

  85–93, 117

  Keating Five scandal (see Lincoln

  Savings and Loan Association) Kelley, Edward, 199

  Kennedy, John, 26

  Kennedy, Robert, 320

  Kennedy, Ted, 5, 67–68

  Keon, Ed, 318

  Keynes, John Maynard, 26

  Keynesian economics, 26, 39 King, Mervyn, 331

  Kissinger, Henry, 56, 69, 70, 74 Kissinger, Nancy, 74

  Koch, Ed, 74

  KKR (see Kohlberg Kravis

 

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