Maestro : Greenspan's Fed and the American Boom

Rating:
Summary: Seriously Flawed, Superficial Look at Greenspan's Leadership
Review: Before commenting on the book, let me state that Dr. Alan Greenspan has been the best chairman of the Federal Reserve that we have had. He has risen well to every challenge and the current record-setting economic expansion is partly a testament to his skill both as an economist and as a government leader. I give Dr. Greenspan far more than five stars for his handling of the market meltdown in October 1987, persuading the Clinton administration to lead on cutting the budget deficit, nursing sick banks back to health, in keeping a sharp focus on inflation fighting, for being vigilant about the frothy levels of stock prices, getting us through the Mexican, Asian, and Russian financial crises, and for vastly improving the methods used to track the economy.

To the potential reader of this book, let me give you two cautions. If you like exciting reading, go elsewhere. Economics and monetary policy are pretty boring stuff, and the way they are treated here makes them more boring than they have to be. Second, if you want to learn about the significance of Dr. Greenspan's role at the Federal Reserve, skip this book. It misses the target in that area.

Mr. Woodward, by comparison, is lucky I gave him 3 stars. The man treats biography as though he is uncovering the Watergate scandal, and the end justifies the means. For example, he does not cite sources. This means that the reader cannot judge for her- or himself what bias may be present in the material being quoted. For example, the first pages of the book slam James Baker in every possible way short of accusing him of being a pedophile. Who is this source (or sources) who is (are) providing the dirt? What do they have to gain by blackening Mr. Baker's reputation? I would like to know before I take the information seriously. Any other biographer or historian would tell you.

The second problem is that Mr. Woodward does not seem to know very much about economics or the Federal Reserve System. For there is little about either subject in a book that primarily focuses on Dr. Greenspan's role at the Fed. For example, the book does not even describe all of the legislative objectives that have been set for the Federal Reserve by Congress. The Humphrey-Hawkins legislation about encouraging full employment is first mentioned more than half-way through the book. Those who are not familiar with the subject wouldn't have guessed that Dr. Greenspan was supposed to be addressing this subject and was reporting to Congress regularly on it as Mr. Woodward reports on what Dr. Greenspan was doing to fight inflation.

Now, most will agree with me that economics is a pretty difficult subject to write about. But Mr. Woodward could have written about someone else rather than Dr. Greenspan. In this book, economic events, thoughts, and analyses are usually treated as either minor background events or as gossip items to reflect on personal qualities. As such, the economic events and implications are greatly oversimplified. For example, I doubt if many readers can understand the obscure references in the book to Dr. Greenspan's successful search for the missing service productivity measurements. At a minimum, Mr. Woodward needed a coauthor who is an economist to add some depth related to the book's treatment of Dr. Greenspan's work.

A third major problem with the book is that Mr. Woodward makes a great deal out of unused contingency planning in crises. These are dropped on the reader to suggest we were a hairs-breadth away from financial Armaggedon. That is like reporting the fact that we always had bombers in the air with nuclear weapons during the Cold War as suggesting that we were always about to bomb the USSR. All government agencies are always preparing for contingencies that will never occur. That doesn't mean that the contingencies are imminent. Mr. Woodward, for example, tries to make a case for having us think that President Reagan might have closed down the New York Stock Exchange in 1987 and that it could have taken a week to reopen. This is pure sensationalism in my view. It probably helps sell books.

The strength of the book is based on the fact that the Federal Reserve releases the transcripts of its deliberations. Mr. Woodward has liberally used these transcripts to give you a flavor of the consensus-building process he uses to lead in creating policy and interest rate decisions by the Fed. This raw material in interesting, even if Mr. Woodward's characterizations of these transcripts frequently are not. He makes a great deal about differences between Alan Blinder and Dr. Greenspan. That is much ado about nothing, and simply makes the book longer. Achieving consensus in Dr. Greenspan's Fed is a lot like the EDS television commercial about cowboys herding cats, especially after President Clinton began making appointments to the Fed.

One of Dr. Greenspan's great strengths is his approach to preparing for decisions. He is unusually open-minded, willing to listen, and eager to get better information. This makes others more willing to listen to him, and to pay attention to this views. It also allows him to improve his own views in useful ways. The book does a reasonably good job of exposing the benefits of this approach.

In two other minor areas, the book is clearly deficient. Mr. Woodward fails to discern the usefulness of Dr. Greenspan's complicated communications. You can read whatever you want into them. The Federal Reserve chairman is required to make more speeches, deliver more testimony, and to answer more questions than just about any other public official. Usually, the best result is to have to no impact on the financial markets. Dr. Greenspan is brilliant in performing these tasks in a neutral way. To listen to Mr. Woodward, you get a sense that Dr. Greenspan's convoluted communications are solely some sort of genetic defect acquired from his father.

Mr. Woodward does notice that stock price levels are high, but fails to fully appreciate how much the surging markets reflect a failure of Fed policy. Clearly, the interest rate raises we have going on now have been aimed more at the stock market (in a preemptive strike against future inflation) than against anything else. How will it all turn out? Much of Dr. Greenspan's final reputation will be determined by this open chapter in the story. I wish him well.

After you have finished reading this book, I suggest you consider the next biography you plan to read. Ask yourself these questions: What does the biographer have to know about to be competent in this area? Who would be an ideal biographer? How much time needs to pass before a reasonably objective and complete biography can be done? As a result, you may find your choice of subjects more limited than you like. Certainly, this book would fail these tests.

As for Mr. Woodward, please go back and write about crooked politics. You do that well, and your methods and skills are more appropriate there.

Rating:
Summary: Far too superficial for its topic
Review: Bob Woodward will probably go down in history as one of America's most influential journalists. In collaboration with Carl Bernstein, Woodward publicized the Watergate scandal and helped to bring down the Nixon presidency. His efforts to reveal the truth may have single-handedly changed the relationship between the media and politics.

Woodward has already been blessed with his 15 minutes of fame. His latest work, "Maestro: Greenspan's Fed and the American Boom," represents neither earth-shattering importance nor an erudite treatment of his subject, Alan Greenspan and his reign over the Federal Reserve.

To its merit, "Maestro" does shed a surprising amount of light on a once mysterious and self-consciously secretive organization. The inner-workings of the Fed and its policy-making are depicted with excellent detail, as Woodward takes the reader through the bumpy rides of setting interest rates from 1987-2000. And for non-economic types, Woodward does a pretty decent job explaining how monetary policy works and what the implications are for increasing interest rates or expanding the money supply.

Yet it is a shame Woodward is not an economist himself because his book suffers from a lack of depth on certain issues. The work's treatment of developments over the last decade, including the savings and loan scandals of the late '80s and the Asian financial crises of the '90s, is rather superficial.

What is most bothersome about Woodward's work is its failure to point out many of the negative conclusions the details of the work might necessitate. The author's editorial on his subject is one of pure praise, as he attempts to elevate the status of Greenspan to that of a modern hero. The truth is far more complicated than the rose-colored picture Woodward would like to paint.

One of the scariest points Woodward's book fails to make is that the position of chairman of the Federal Open Market Committee is perhaps the most powerful seat of economic policymaking in the United States. Many students of the Fed's operations grow up believing that interest rates are set by the democratic vote of a committee of economists. In reality, the monetary power of the last 13 years has rested in the judgement of one man.

Greenspan's career epitomized the struggle to push the envelope on limitations to power. The chairman was the master of the FOMC, and before each meeting, he polled and called every member to figure out each one's stance on whether to raise or lower interest rates. Since the chairman always speaks last at an FOMC meeting, Greenspan often could plea for the universal support of his decisions, and his careful rhetoric frequently was enough to achieve the policy outcomes he desired. There were even times from 1988-1999, when the committee voted to allow Greenspan to make minor adjustments in the Fed Funds rate between meetings, giving him complete monetary control.

We are all lucky that Greenspan has handled the responsibility of his power with such sobriety. What if Greenspan had not been so judicious? An America where the sovereign economic policymaker was a bumbling idiot would resemble the despair of 1929, when interest rates were raised even after the stock markets crashed. The very idea that determining the Fed Funds rate could rest in the hands of a moron is a scary thought.

Another frightening notion Woodward doesn't elucidate is the number of problems with the way our system allocates its human capital. Many of those on the FOMC were there simply because they had political ties and connections. If Greenspan were to resign tomorrow, party friendships and political allies could influence the new appointment.

Often when economic policymaking is submerged in politics, short-run prosperity is prioritized, and little thought is given to where things will head five or 10 years down the road. If we had a Fed chairman who - because he was a pawn of politics - strove for break-neck growth without regard to price stability, disaster could occur. Woodward strives to make the point that Greenspan always has tried to put his job above factionalism, but Woodward fails to recognize that future Fed chairmen may not behave the same way.

Overall, Woodward's "Maestro" gives a decent overview of the history of economic developments and monetary policy in the last decade. The book's flaws lie not in the display of facts but rather in its pure, unquestioning praise of its central figure, Alan Greenspan. I would not disagree with statements that Greenspan has done his job especially well. He, however, has been fortunate, as circumstances beyond his control contributed to the record expansion of our economy and our subsequent prosperity. Greenspan's ability as Fed chairman surely will be tested as our economy slows, and whether we continue to prosper will determine if he really has, as Woodward says, a "mastery of process."

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: A human view of a superhuman
Review: I just finished Bob Woodward's latest book, Maestro. It is an account of Alan Greenspan's Chairmanship of the Federal Reserve Board. Overall a well written work, it dwells mostly on the inner workings of the FOMC. It also delves into the relationship between the Fed and the executive branch of the government. Accounts of the tensions between Greenspan and various Presidents over the direction of interest rate directives provides for some of the most interesting reading. Also of note is Woodward's account of the Fed's role in various financial crises, particularly Mexico in 1995 and Long Term Capital Management in the summer of 1998. All in all the book offers valuable insight into the workings of the U.S. and world capital markets but does not express those insights in overly complex terms. One of the most important parts of the entire book is not actually in the book - it is instead in the epilogue. As he builds toward his conclusion on Greenspan's place in the present and in history, Woodward remarks that, "Greenspan stands at the crossroads of optimism and pessimism. Each of us is a character in the nation's great economic soap opera; Greenspan is both director and producer." This is a significant observation, for it forces us to acknowledge that our economic realities center not only on laws of supply and demand but also on emotions. Human emotions, at times subject to nothing more than unbridled fear or fervor. It is perhaps the simplest and most powerful realization any of us could reach - and one of the most laborious. Bob Woodward deserves our thanks for his masterful telling of the highs and lows of the economy and the apparent stoicism of Greenspan in dealing with them. Maestro is a profile of a pivotal figure in history. More than that, however, it challenges its readers to step into the shoes of the man who moves markets, leaving them with the distinct impression that he is often as unsure as anybody else (or ar least as unsure as any of his colleagues at the Fed). His attention to detail, coupled with an uncanny intuition for the nature of business gives him the courage to make difficult choices despite this uncertainty. Therein lies his genius.

Rating:
Summary: Engaging, Surprising, and Informative
Review: I read this book wanting to be better informed about how The Fed and Greenspan operate, and wound up being thoroughly educated and entertained understanding how banks, the White House and Washington DC political appointments work. I never thought I would ever use the phrase "hard-to-put-down" in connection with an economics/banking book but this one did it. It was a real page turner and definitely one of Bob Woodward's most underrated and under-discussed books. (No caller mentioned this work during his 3-hour C-Span interview a few months back.) Get your hands on a copy of this book and prepare for an interesting and enjoyable ride. My one complaint: I wish it were longer. Although this book answered all my "Fed" questions, I wished its time track would continue to the present, or perhaps delve a little deeper into the past. But this complaint notwithstanding, the book was still an excellent and engaging read.

Rating:
Summary: An Incomplete Account
Review: Mr. Woodward's latest book is almost a mirror image of Justin Martin's biography of Alan Greenspan. Where Martin's book deals more completely with Mr. Greenspan's life but gives short shrift to his time as Fed Chairman, Maestro does just the opposite - it deals almost exclusively with Mr. Greenspan's time at the Fed to the exclusion of everything else. As someone involved with finance on a day to day basis, I am more partial to Woodward's focus, but that is probably a matter of individual taste and preference. One solution is to read both of them because together they make a halfway decent biography.

The average reader with little or no knowledge of economics will find this book readily accessible, but that is part of the problem. Mr. Woodward, as is his normal style, focuses more on the politics and personalities and less on the economic principles involved. The end result is like fat free food - easier on the waist line but ultimately unsatisfying.

Overall, this book is a decent introduction to Alan Greenspan's time at the Fed, but we will have to wait for someone else to write the definitive biography of one of the most important financial figures of the decade.

Rating:
Summary: flawed Washington hagiography
Review: The conduct of monetary policy in the US is important to the US and the rest of the world. Alan Greenspan is an interesting figure of historical significance. This book sheds little light on either subject.

The book is hampered by its episodic nature, and, apparently, limited range of sources. Woodward tries to sustain a narrative based largely on the twin themes of Greenspan's ability as Chairman of the Board of Governors of the Federal Reserve System to manipulate the Federal Open Market Committee (FOMC) which sets an important benchmark interest rate, and whether that instrument, the federal funds rate, is moved up or down.

The first theme is of questionable interest: the institutional structure of the Fed gives the chairman enormous power. It is not at all clear than another chairman, with a different substantive agenda and a different personality, could have just as effectively dominated the institution. Despite Woodward's efforts, it is not at all clear that Greenspan is a "maestro" - on the contrary, he comes across as a mildly unpleasant character who treats his colleagues shabbily.

As for the second theme, well, it doesn't exactly make for a page turner.

These flaws alone would not earn the book such a low rating. The real problems are sloppy writing and factual inaccuracy. To give one example: Woodward tells us that Greenspan was born in 1926. After graduating from high school, he attended Julliard School of Music for two years and then dropped out to join a touring big band. He then quit the band, went back to school, and graduated from NYU with a degree in economics in 1948 . Woodward writes that Greenspan received a masters degree in economics from NYU in 1950 and then entered the Columbia Phd program but quit before completing his dissertation. In the 1970s, NYU then "finally awarded" him what amounted to an honorary doctorate

This description begs more questions than it answers. How did Greenspan spend two years in a conservatory, tour with a band, and graduate with a degree in economics at the age of 22? What about military service? Greenspan would have been of prime draft age for the Second World War. Did he get some kind of exemption? If so, for what reason? And why would NYU "finally award" the doctorate if the work had been done at Columbia?

One might overlook these flaws (even in biography) but they carry on into the more substantive sections of the book. To give another example: Woodward's chapter 12 description of the Korean financial crisis of 1997. He argues that the US government wanted US bankers to rollover their loans to Korea; that the bankers would have been able to resist pressure from Bob Rubin and Larry Summers of the Treasury, but not from the Greenspan Fed; and that Greenspan stood back while the Treasury jawboned the bankers. This account is deeply flawed.

The critical rollover meeting was convened on 22 December 1997 by New York Federal Reserve President Bill McDonough in his office and attended by the heads of JP Morgan, Chase Manhattan, Citibank, Bank of NY, Bank of America, and Bankers Trust. McDonough convinced the six money center banks to rollover their Korean loans, and having whipped the US banks into line, he then successfully brought the Europeans and Japanese on board. The 22 December meeting was arguably the turning point in the crisis.

So why no mention of it in Woodward's account? Its hard to believe that the author is unaware of it. One is tempted to surmise that he deliberately omitted it from the narrative to set-up his interpretation in the succeeding chapter of the next crisis Greenspan encountered - the near collapse of the hedge fund Long Term Credit Management. Again, there is a financial crisis, and again, the head of the New York Fed uses his office to jawbone US financial institutions to act against their own narrow interests. However, in Woodward's telling, this is an unprecedented event, and Greenspan stands (well, actually sits) shoulder to shoulder with McDonough in the face of hostile Congressional critics. Why this portrayal of the Fed's action in the LTCM case as being unique? Is it because that action was seen as stopping a threat to the US economy, while the earlier intervention merely saved Korea (and did not save Russia and Brazil which subsequently encountered similar problems)?

At root, the problem with this book is as a rather hagiographic biography, it simply does not address the broader, and to my mind, more interesting questions such as whether it is desirable to have monetary policy conducted by an institution with little democratic accountability steered by the "pains in the stomach" of its chairman?

Perhaps this is unfair. In the end, we don't expect journalists to be deep-thinkers. But we do expect them to get their facts straight. Inaccuracies and heavy reliance on unnamed sources (from the man who, in a prior work, gave us Nixon talking to the White House paintings) makes me deeply skeptical of the value of this book either as biography, as an examination of the Fed, or as an analysis of monetary policy.

Rating:
Summary: Good book with some small limitations...
Review: This book gives a view of monetary policy and financial regulation from Greenspan's perspective as close as is physically possible without employing the chairman himself as author. The biography seeks to reveal how Greenspan and the Fed operate. The author views the Federal Reserve as a very important American economic institution and Greenspan as a one of a kind Chairman of the Board of Governors. I think the author recognizes that sometimes Americans and foreigners give Greenspan too much credit for the economy. He breaks down this social phenomenon for the readers in the epilogue. "The fascination with Greenspan has become one of the ways which the country expresses confidence in itself and in its future" (228). The reader gets to listen to the Fed's internal debates and learns about Greenspan's life. The book explores how the Fed controls monetary policy and details the actions of the Fed in the Greenspan era, 1987 to 2000. The book also touches on several financial crises of the Greenspan era including: the 1987 stock market crash, the S&L crisis, the commercial banks' loan problems in the early 1990's stemming from real estate and Latin America, the Mexican Crisis, Russia currency devaluation, Long Term Capital Management (LTCM) and the stock market "bubble." These events are only briefly addressed, with the focus being how they relate to the Chairman of the Board of Governors, Alan Greenspan. The book briefly addresses current economic debates. The author was particularly interested in the high growth, record employment, low inflation and high stock market in the late 1990's that seems to defy economic theory.

The book explores some academic debates, but overall the book is not an academic work. The author does not point this out, but it is clear from the author's background in journalism and the structure of the book. The backbone of the book, its pacing, come from headlines from The Washington Post and The Wall Street Journal. The headlines act as sign posts of the political and stock market perception of the FOMC's stance and future actions. In regard to references, while there are "notes" in the back of the book that give further detail and some sources, other sources are not revealed. For example, in the prologue four primary sources go unnamed. While this may allow greater access for the reader, it limited my ability to appreciate the book. It is very odd how some dialogues between prominent figures are not in quotes. What is the source for this information? Is it made up dialogue? In another case, after the Sept. 4, 1987 increase of interest rates by 1/2 to 6%, the author has a long paragraph of how Greenspan felt. Woodward describes Greenspan's emotional state, "he felt almost as if an earthquake were occurring and the building were rattling" (33). Firstly, how does Woodward know how Greenspan was feeling. Even if Woodward has some special source, statements like this make me uncomfortable. Readers should be aware of this, but it should be noted that Bob Woodward's reputation is top notch, and he is known for his investigative Washington reporting. Bob Woodward is best known for breaking the Watergate story. Woodward is assistant managing editor of The Washington Post and has been a newspaper reporter and editor for thirty years. While lack of sources and unquoted dialogue are distracting and hurt the book, Woodward gives amazing descriptions of Greenspan that seem cut straight to the essence of his persona. "Greenspan radiated gloom. He spoke in a gravelly monotone, often cloaking his thoughts in indirect constructions... It was almost as if his words were scouting parties, sent out less to convey than to probe and explore" (30).

I would highly recommend this book. The behind-the-scenes descriptions of the 1987 stock market crash are worth the price of the book. Like the rest of the book, the writing gives the feeling of actually being there and the debate lets readers know the importance of the decisions being made. Greenspan once said, "If you're not nervous, you shouldn't be here" (Greenspan qtd in Woodward).