Maestro: Greenspan's Fed And The American Boom

Rating:
Summary: Greenspan's Firm Hand on the Wheel
Review: Have you ever wondered who exactly the "Fed" is, and how they control the unseen levers of the American economy? Quick...what's the difference between the "Fed Funds rate" and the "discount rate?" What influence does partisan politics have on this whole process? Who exactly is Alan Greenspan, and why did we never hear about any Fed Chairman prior his tenure? Bob Woodward addresses these questions, and many more, in this compact, entertaining, and informative volume.

Maestro starts off with Alan Greenspan assuming the Fed Chairman levers of power from Paul Volcker in 1987, shortly before the "Black Monday" meltdown, and takes us through his unprecedented appointment to a fourth term in early 2000 by a most unlikely soul mate, President Bill Clinton. With Maestro, author Bob Woodward continues to fill the literary niche that he has for his past several books: writing about subjects and events that are too topical and recent to be seen in a fully objective historical context, yet producing a volume that has much more depth and substance than day-to-day journalistic coverage. Woodward's access to the Washington elite is unrivaled, and this book, as many of his previous ones, relies heavily on the journalistic tradition of the unnamed source.

Maestro takes us into the meetings of both the FOMC, and the Fed Board of Governors. Woodward lets us be a "fly on the wall" in those meetings, and allows us to hear the discussion, interchange, and debate about the national and international economy that precedes a change in the Fed funds rate or discount rate. We see the Board of Governors, and Greenspan himself, as brilliant but fallible human beings who, like the rest of us, see their jobs and obligations through the prism of their own political viewpoints. Additionally, though, Woodward takes us into minds of the individual members, through what certainly were many off-the-record interviews, to see how the Governors feel about the process, and about Chairman Greenspan himself. Viewpoints range from admiration and deference to jealousy and envy, and Woodward lays it all down for us. In one scene, Woodward shares with us a somewhat frustrated President Clinton venting his emotions through an impersonation of the Fed Chairman, right in the Oval Office, to the side-splitting laughter of the President's advisors. Granted, this doesn't have the national importance of "seventeen minutes of missing tape," but it does make for good reading.

Woodward, as usual, maintains a laser focus on his subject, refusing to be diverted for more than a minute by the Clinton-Lewinsky fiasco, or even by areas of Greenspan's life that he doesn't deem as relevant. At first, I found myself hungry for more details about Greenspan as a person: what does he like to do in his spare time? What kind of a neighbor would he be? It doesn't take long to realize, however, that with Greenspan, the professional is the personal. He has no children that we know of, just married his longtime sweetheart (NBC correspondent Andrea Mitchell) in 1997, takes only one brief vacation a year, and has been absorbed in studying economic data since 1948. Greenspan truly exhibits the meaning of the old saying, "Do what you love and you'll never work another day in your life."

You don't need an MBA or a PhD in Economics to understand and appreciate this book. Woodward includes a helpful glossary in the back that I, even as the possessor of one of the two above-noted degrees, found myself referring to with some frequency. Not only does one not need vast empirical economic knowledge to appreciate this book, the reader may even get more out of this book without it. The most significant drawback of this book is the lack of a sense of completion. Greenspan's story is a work in progress, and this book with undoubtedly be regarded in the future as perhaps an interim analysis of his accomplishments. The book ends just when the tech stock slide is beginning. The most relevant questions are yet to be answered: how have perceptions of Greenspan been altered by the slowing economy? Will President Bush reappoint Greenspan to a fifth term in 2004? If not, how will the President replace the man that has become synonymous with the Chairmanship itself? Is any succession planning underway? One can only hope that Woodward stays in contact with his spiderweb of sources, and shares that information with us in a future work.

Rating:
Summary: Bob Woodward: the ultimate fly on Alan Greenspan's wall
Review: I must admit that, when I began reading Bob Woodward's Maestro: Greenspan's Fed and the American Boom, I was skeptical. First of all, the title seemed overblown, implying that Alan Greenspan was THE ONE and possibly ONLY ONE who had orchestrated the fantastic U.S. economy of the past 10 years or so. Given the vast size and complexity of the U.S., let alone the WORLD economy, that just didn't seem plausible to me. Second, I wondered how much of this book would reflect the "good" Bob Woodward (smart, even-handed, easy to understand, great access to sources) and how much the "bad" Bob Woodward (too much the Washington insider to be truly critical or an "outside the box" thinker; the heavy use of anonymous sources - he says he talked with hundreds of people, but doesn't say who they are; too little analysis; sometimes lazy and seemingly uninspired, "paint-by-numbers" writing; etc.). In the end, I found both "good" and "bad" Woodwards here (my ultimate conclusion is that they are inseparable, "flip sides" of the same coin, if you will), but overall, I think the good outweighs the bad, making this book interesting and definitely worth reading.

What's cool about "Maestro," and about Bob Woodward in general, is that his practically unlimited access to all the players makes you feel like you are right there, a fly on the wall during important top-level meetings. And not just any fly, but a Bob Woodward special mind-reading fly! Yeah, I kind of like that...Bob Woodward as a mind-reading fly, with the amazing, uncanny ability to recreate people's conversations, and even INNER dialogues, years after they took place, and when the fly WASN'T EVEN THERE when the dialogue took place! So, how does this fly do this? Well, pretty much, it talks to lots of other (anonymous) flies, especially the really big, important ones (at least in their own minds). And, of course, EVERY other fly wants to talk to the Bob Woodward fly, because, well, 'cause it's cool when your words and/or analysis gets in his book! Plus, you certainly wouldn't want to be the only big, (self) important fly NOT to have talked with the Bob Woodward fly, the uber-fly, the LORD of the Flies (sorry, that was a bad one, I know)!

Are there negatives to "Maestro?" Well, the book is certainly not perfect. Two things that particularly bothered me in "Maestro" were: 1) some stretches of the book are actually kind of dull, even boiler plate, both in terms of content AND style; and 2) Woodward the ultimate insider doesn't bring much real critical analysis to this book, and at times the tone seems almost worshipful of his sources.

Still, I felt like I gained a lot of insight from "Maestro" into how the Federal Reserve really operates, how decisions get made in Washington (it's not all good or all bad), and how much (or little) control top policymakers have over events (e.g., the October 1987 stock market crash, the 1994/1995 Mexican peso collapse and bailout, the Asian economic crisis of 1997, the August 1998 Russian default and near chain-reaction collapse of the entire bond market). Also, once again we can see that, for better or for worse, the role of personalities is extremely important. But, at least at the Alan Greenspan Fed portrayed in this book, what amazed me as an economic analyst myself was how much data, models, analysis, and intellectual debate really matter. Also, I think that Bob Woodward does an excellent job in focusing on (and explaining) the importance of getting good, real-time information on specific sectors and sub-sectors of the vast economy. Alan Greenspan himself understands this very well, checking the latest numbers on his computer screen almost obsessively, with just a "stroke of Button A". At times, I can't tell whether Greenspan is more the Wizard of Oz or more the little man behind the curtain, fooling (and impressing) everyone - except, in the end, Toto the dog -- with essentially smoke and mirrors (and incomprehensible, eye-glazing, mind-numbing statements that seemingly could mean anything)!

Ultimately, what you've got here is a mixed bag, but overall (in my opinion) the bag has significantly more good stuff in it than bad. Or, to put it more formally (more Alan Greenspan-like?), I believe that the positive attributes of Bob Woodward's "Maestro" overall tend to outweigh the negatives. Would it be better, as one reviewer states, to "read the alternative press" to get the "outsider" view of Washington (in this case, Alan Greenspan)? Or do you think you're better off with the ultimate "insider" perspective? My answer: YES - read both - and form your own opinions! But don't dismiss Bob Woodward and "Maestro" just because they ARE "inside the Beltway." That's just silly, since the people Woodward writes about are powerful players whose actions can (and do) significantly influence our lives. Given that, it's a good idea to try and understand them, and "Maestro" is not a bad place to start!

Rating:
Summary: Some amazing tales of financial problems
Review: Unless you have lived in a cave the past several years, you understand the power that Alan Greenspan, the long-term chairman of the Federal Reserve has. However, the ways in which he exercises that power is not easily discovered and the tales of how he does it is a lesson in the subtle application of influence. However, that is not the most interesting tale in the book. That place is taken by the instances of near collapse of the world economic structure during the Greenspan years.
The first occurred on October 19, 1987, when the New York stock market crashed. I followed the market closely at that time, but until I read this book, had no idea how close the American financial system came to collapsing. Woodward strongly suggests that the stock market was saved by manipulation performed by unknown persons. It is also clear that some officers of the Federal Reserve Bank system knew that it was possibly the case, but felt that the prudent course was not to look at it too closely. Despite the fact that such behavior may have been illegal. However, the most astonishing point of all is that on a day when close to a trillion dollars of paper wealth vanished in a few hours, it was the purchase of $60 million worth of stock that saved the day. Given that the actual investment was a fraction of that, the situation is that the American economic system was possibly saved by the investment of less than $20 million.
The other two major crises had foreign origins. In 1995, the financial stability of Mexico appeared to be unraveling, with the potential for a domino-like collapse of the economies of several other countries. Since the Fed cannot act directly, the political maneuverings that took place and led to the bailout are two major lessons. The first is how the federal government manages to stumble somehow to a solution to a problem and the second is how the Fed under Greenspan can exert power simply by offering "suggestions." The second major crisis was the near collapse of the economies of several Asian countries in 1997, once again averted in part by the actions of the Federal Reserve.
I have read many of the other books by Bob Woodward, but believe this one to be the best. The stories are amazing and it is clear that Alan Greenspan is the most powerful person in the world today. May he stay long and help us continue to prosper!

Rating:
Summary: A book about Greenspan, not Economics
Review: Other reviews have made this point, and I agree: if Bob Woodward knows a lot about economics, this book doesn't show it. That's not to say that Woodward knows nothing about economics, however. Basic ideas such as arbitrage, the discount rate, hedge fund and NAIRU (all of which are crucial to the narrative) are explained well enough. The problems come with some of the less well-defined ideas. For instance, when the necessity of hedge funds is questioned Woodward simply explains that they play an important role in our economy and should be kept. Case closed.

Of course, another of the more nebulous questions that Woodward sweeps under the carpet is that of Greenspan's leadership (and yes, Woodward does seem to engage in quite a bit of hero-worship at the altar of Greenspan). One of the main points of this book is that Greenspan engineered the so-called "soft landing," allowing the American economy to experience boom without recession. Woodward fails to mention, however, that economists are not yet sure if we really have achieved a soft landing, and are even less sure if Greenspan's policies directly or indirectly led to it.

This is not to say that Greenspan has not performed well as chairman of the Federal Reserve. I believe he has, and Woodward's account provides many interesting details of how exactly Greenspan works. This behind-the-scenes look at the Fed and Greenspan's life is the real strength of "Maestro." This book does an excellent job of allowing the average person to get an insider's look into the Fed.

Woodward's prose is clear, but not artistic, providing an enjoyable narrative voice, but little else. While "Maestro" is certainly easy to read and enjoyable, this is not a book that paints Washington in a rich pallet of words, but rather a more bare-bones description. Simply put, the prose reflects Woodward's upbringing as a member of the press.

Woodward, if he so desires, may argue that Greenspan was the reason the American economy has experienced a soft landing. Unfortunately, this makes the author's book worse because Woodward is not rigorous enough in making a believable argument. However, if you can get past that you will find that "Maestro" is a very worthwhile book. It certainly illuminates the life of one of America's most famous politicos, explaining several facets of Greenspan's life from how he came to be Chairman of the Fed, to how he governs, to the interplay between the White House and the Fed, and to even Greenspan's personal life. In other words, read it for the biography, not the economics lesson.

Rating:
Summary: Alan's, not Adam's hand....
Review: This book is worth reading on several counts. First, a speculator learns a bit about how Greenspan thinks and acts, which is valuable information about the market. Second, the cooperation betweeen two very curious, practical-minded intellectuals, Clinton and Greenspan, is discussed, so we can abandon any fantasy that Dubya and his warmed-over ideologues will be good for the economy. Third, and very interesting, the extent to which Greenspan does not rely on neo-classsical economic theory is emphasized. In a nutshell: if Adam Smith's hand existed (or if unregulated free markets had any stability at all) then Alan Greenspan and the Fed would be superfluous. That his hand is needed is qualitative evidence that Adam Smith's hand does not exist. For those who want the quantitative evidence for this assertion, from stock, bond and foreign exchange statistics, please feel free to contact me via email. Also surprising: that Greenspan tried to read and understand Einstein's 1905 paper on special relativity. My only question: did he read it in translation or in German.....?

On the negative side: a bit too much cheerleading and hero worship.

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Rating:
Summary: A fly on the wall in Greenspan¿s world
Review: "Mastro - Greenspan's Fed and the American boom" written by the Washington Post journalist Bob Wooodward is the history of Alan Greenspan, the Chairman of the United States Federal Reserve. From his nervous start in 1987 to the "guru"-status that Greenspan enjoys today.

Woodward is our guide through an extraordinary inside look at the making of policy. We get a feel for the enormous power of the Federal Reserve and the great power that Chairman Greenspan has. (Very interesting reading - I had no idea that the decision making process within the Fed is such a chaotic process!!) Woodward explains the workings of the Federal Reserve in such a way that the lay reader is able to appreciate the effort of Greenspan and his colleagues. Together with the glossary on page 230-234 this book is a quick and entertaining read which touches on many interesting topics. This book is a good source as an *introduction* to Greenspan and the politics inside the Fed. On the flip side, with its' 200+ pages, this book cannot be more than a brief introduction to the Greenspan world. I don't think that the author goes deep enough into the material to give justice to Greenspan as a leader, to his economic skills, nor to his ability to carry out policy.

Something that always has troubled me with Woodward and his writing is that he does not cite his different sources! This means that I as the reader cannot decide for myself what kind of prejudice and/or bias that might be present in the material that he quotes in his books. This is something I find extremely annoying!

On a more personal note; I think it is strange how a "fling" in the White House can overshadow an event of such great magnitude like the potential meltdown of the world economic system in 1998 really was. The Fed's was desperate for attention, to the extent that Paul Kanjorski, democrat from Pennsylvania, suggested injecting some sex into the Fed's so that they could get more media attention!!

[A tip to the author/publisher: It would have made more sense to place the glossary pages *in front* in this book, rather than in the back where it is currently placed. For the lay reader without at least some economic background it is useful to read this page and acquaint with the different expressions *before* reading this book. As it is now, one finds it after finishing reading the epilogue!].

Rating:
Summary: but it's all improv
Review: If I was right in my review of Agenda, and Bob Woodward really is embarked on a clandestine conservative project to demonstrate that government and human affairs are fundamentally unmanageable, then this book is the capstone on that project, which he has now successfully completed.Greenspan neither has any idea what is truly going on with even the most fundamental trends in the economy, nor does he pretend to.

That is the most important message conveyed by this book, that Greenspan, almost universally perceived as the ubergenius who has guided the current economic expansion, has been more or less flailing for his entire term, and no one is more aware of it than he. Like all of Woodward's books, this one excels at giving the reader a rare inside look at the making of policy. what will come as a shock to most people, particularly to readers of William Greider's book Secrets of the Temple, is how fundamentally chaotic that process really is. Greider and most Fed critics contend that the Federal Reserve is an all powerful, unaccountable institution which manipulates the economy in order to serve the interests of banks and bond holders (i.e., the rich) at the expense of borrowers (i.e. , the middle class). Greenspan and his fellow Fed members do certainly emerge as zealous guardians against inflation--particularly the Chairman himself who is from the generation of leaders who quite helplessly fought against the explosive post-Vietnam inflation of the 1970s--but throughout the book they are fighting a monster who stubbornly refuses to rear his ugly head.

Much of modern economics is based around the near religious belief in the concept of the non-accelerating inflation rate of unemployment (NAIRU), which essentially holds that there is a limit below which unemployment can not fall without triggering inflation rises. The reasons for this are fairly self-evident; at some point the competition between employers for new workers must put pressure on wages. However, during this prolonged expansion unemployment has been driven far below the accepted NAIRU, once thought to be over 6%, and has stayed low without setting off the predicted inflationary effects. Of course, it might be possible to temporarily hide increases in labor costs, if companies ate into their own profit margins, but profits have grown during this period also. This is theoretically impossible and neither Greenspan, nor any of his peers, could figure out what was happening. Finally, and I mean finally, after a period of years, Greenspan determined that their statistics were undermeasuring enormous productivity increases, driven by technology, which were alleviating inflation pressure.

Meanwhile, there were several other phenomena which they either never comprehended or Woodward didn't, but which seem readily amenable to at least partial explanation. Three of the tasks that Greenspan and the Fed pursued over this period were to return the Federal government to balanced budgets, to tamp down the skyrocketing stock market, and to slow the rapid growth of the US economy. They failed utterly at all three : why ?

The Budget

Many would protest that they succeeded here, but a government that is running an $800 billion surplus, as ours is projected to do soon, is being mismanaged just as badly as one which is running enormous deficits. What happened here ?

The simple fact is that Greenspan and the rest of the green eyeshade crew got so caught up in the microeconomics of budget numbers that they failed to look at the changing global landscape. It is obviously the case that America ended the Cold War running large deficits and they were exacerbated by the inevitable industrial restructuring as the economy changed from a wartime to a peacetime posture. But the other obvious fact, obvious at the time had anyone cared to think about it, was that there was about to be a titanic peace dividend. First, defense spending has plunged, to the point where we now budget roughly the same percentage of money for defense as we did prior to Pearl Harbor. By itself, this savings would probably have resulted in balanced budgets. Second, America had basically been pursuing a "guns & butter" policy since the time of JFK. In exchange for the public's acquiescence in Cold War adventurism, the government had vastly expanded domestic spending, Additionally, wartime imperatives had given labor a whiphand, allowing them to push for ever higher wages as a cost of producing the weaponry with which to confront the Soviets. The end of the Cold War made it possible to confront the public and labor, with the result that domestic spending and industrial wages both stopped increasing at their prior rates. Finally, the defeat of the Soviets freed something like a quarter of the world's population from communism and turned them into consumers, hungry for our goods. The $500 billion deficit package that Bill Clinton and the Democrats passed in 1993, and George Bush's earlier package, pale in comparison to these enormous structural changes in the US and world economies. If anything, it is likely that the deficit plans acted as an unnecessary brake on US postwar economic growth and delayed the point at which the budget went into balance.

The Market Boom

This is still just a theory and I suppose it will eventually be put to the test (perhaps in the NASDAQ over the coming year), but I wonder whether 401k's haven't made it nearly impossible to drive down stock prices for an extended period. Over 70 million Americans now own stocks in some form, presumably mostly through 401k plans. Total investment in 401k's is over $1 Trillion and more goes in every two weeks. Every paycheck Americans pump money into the market. Sure, at times, like this past January, they tend to sit on the sidelines by putting it mostly in money markets, but they (we) are just waiting for an opportune moment to pump it into stocks. The latest slide in the NASDAQ happens to have coincided with a slowdown in overall economic growth, but let the tax cuts pass or the Fed start cutting rates, and the transfer of money from those funds into the market will get those prices headed back up again. And even during this stretch of relatively bad news, the Dow has stayed well over 10,000. It appears at least a possibility that 401k's, with the thirty or forty year perspective that they necessarily force upon investors, have created a broadbased multitude of stockholders and buyers who are less susceptible to normal fluctuations in the market and who will not be easily influenced by the Fed's attempts to dampen enthusiasm.

Rapid Growth

This is actually a hidden, but unnecessary, victory for the Fed. The combination of artificially high interest rates and the aforementioned debt reduction packages have created an environment where the American people are extremely overtaxed and borrowing costs are much too high. This has slowed the economy, but the countervailing factors are so overwhelming positive that it has still experienced robust growth.

Overtaxation is readily apparent from the surpluses we are running and which will skyrocket in coming years. Interest rates are a little more subtle, but not much. What is the one thing that we were always told about why we had to reduce the deficit ? That reducing government competition for loan money would free up more for private borrowers and result in lower rates. What has happened over the period that the US government went from deficits in the hundreds of billions to surpluses in the hundreds of billions ? Rates have gone up.

Rating:
Summary: Depends on what you want this for....
Review: Do you want to be generally more knowledgeable about one of our nation's most powerful men? Want to understand better how the Fed's decisions affect the economy? Want to appreciate the always-delicate interplay between politics and monetary policy? How about to enjoy reading about economics without being put to sleep? If that's what you're looking for, this book is for you. It doesn't provide ammunition for either side of the political debate, for the most part. The most intriguing thing about this book is perhaps its timing. It's mostly a collection of extended anecdotes about situations Greenspan handled successfully. Will the current situation be an addition or an exception to the tales in Maestro? As of March 01, it's too early to tell ....

Rating:
Summary: Fed Schmed
Review: Looking for a book to give you profound insight into the inner sanctum of the most powerful financial institution in the history of the world? This book isn't it. Woodward appears clueless about economics and trivializes the actions of the FOMC while attempting to raise Alan Greenspan to diety status. Ironically, the portrait of Greenspan emerges as more of a benign genius who is as in the dark as the rest of us concerning the consequences of FOMC actions. Woodwards attempts to dramatize each one-quarter of a point Fed Funds move fall flat, both in analyis and results. Its such a shame that this book will become what many readers will undoubtedly regard as a "true" picture of the Fed simply because it hit the NY Times bestseller list. Obviously, that was the only truth to which Woodward and his publishers aspired . . . sell a bunch of books.

Rating:
Summary: An Economists Must
Review: Greenspan's greatest asset as chairman of the FED, is his ability to keep his cards close to his chest and not play the political game, or does he play it so well that he fools the fools? This book does a great job at looking under the hood of Greenspan.

Maestro goes into great chronological detail of all major FOMC meetings and significant events. Woodward gets somewhat technical into FOMC operations and policy. IF you've ever studied macroeconomics, specifically monetary discretion and operations this book will put those concepts into action.