Greenspan: Admired, but Style Irks Some
In the midst of a burgeoning crisis last fall, bankers attending their annual convention looked to Alan Greenspan for insights and guidance. Instead, they got a nuts-and-bolts lecture on the payments system.
The episode still prompts good-natured ribbing from admirers of the Fed chairman. "Let's face it, some of his speeches are deadly," says John B. McCoy, chairman of Banc One Corp. in Columbus, Ohio.
Mr. McCoy can laugh it off because he knows the 65-year-old regulator well enough to pick up the phone and chat about banking policy.
|Like a College Professor'
But other bankers, who rarely see the Fed chief in the flesh, sometimes are put off by his style.
"He talks too much like a college professor," says John Shivers, chairman and chief executive of Southwest Bank, Fort Worth. "We all would like him to level with us a little more."
Indeed, some bankers feel he is too distant from the industry's problems.
To be sure, these criticisms are at the margin. Mr. Greenspan has generally earned solid marks during his four years as Fed chairman and is a shoo-in to be confirmed for a second term by the Senate Banking Committee early next year, after it holds hearings.
Yet with the economy still slumping, the banking system in turmoil, and the rhetoric of presidential election bubbling to a froth, Mr. Greespan will no doubt face some tough questions about his handling of the economy. And increasingly, when people examine what's wrong with the economy, their attention turns to banks.
For example, critics say Mr. Greenspan was slow to perceive a sharp tightening in lending last year because he ignored anecdotal evidence.
"He missed big-time on the credit crunch," says David M. Jones, chief economist of Aubrey G. Lanston & Co., New York.
Because Mr. Greenspan is "self-conscious almost to the point of being shy," Mr. Jones says, the central banker retreats to his computer screen instead of reaching out to bankers and business leaders for insights on the economy.
Harder to Shrug Off
Others echo that assessment. "You get the impression that this is a person who is more comfortable with computers than he is with people," says one industry executive, who did not want to be identified.
As they get blamed more and more for the stagnant economy, bankers find it harder to shrug off Mr. Greenspan's seeming lack of enthusiasm for banking issues.
Like his predecessor, Paul Volcker, Mr. Greenspan delegates day-to-day responsibility for banking matters to another governor - in his case, John LaWare, a former banker. But that's where the similarities end.
"Once an issue was ready to go to the board, Volcker got into the details before he said, |O.K., let's go with it,'" says a former Fed official. "Greenspan doesn't get as actively involved when banking issues come to the board."
For instance, when banks recently were socked with a politically damaging Fed report on bias in home mortgage lending, Mr. LaWare, not Mr. Greenspan, was dispatched to explain the results to Congress.
And though the Fed chief champions modernization of archaic banking laws, he gets bored and restless when conversations wander away from his pet interests.
"When he's on a topic that he's interested in and the conversation is at a high level, he is very animated and interesting," Mr. McCoy says. "If not, he tunes out."
"There's a passivity," adds a trade association official, who, like others interviewed for this article, was reluctant to be critical of the powerful regulator on the record. "Bankers look for a certain charisma in a Fed chairman, but Alan Greenspan is not someone to lead people into battle."
The Record Hurts
In exchange for reconfirmation, senators will seek convincing evidence that Mr. Greenspan can pull the economy decisively out of recession and set it back on a course toward growth. His protracted struggle to decipher the credit crunch will make it that much harder to sound convincing.
As banks grapple with their own problems on the tail end of a recession, the Fed's interest-rate cuts aren't having the desired effect of stimulating economic growth. It's as if the banking system - chronically sick and in need of innovative treatment - has built up an immunity to the Fed's old-fashioned remedies.
"He certainly understands the traditional American economy and how the government responds to it," says Gary Wright, president of Farmers and Merchants Bank, Monticello, Fla. "But what he was taught to do in cases like this isn't working."
Effect of Decisions Muffled
"Normally you could move the interest rates and the economy would be sensitive to the change," says Frank Zarb, chairman of Smith Barney Harris Upham & Co., and a longtime friend of Mr. Greenspan. "Now, there is a barrier between that decision and the actual effect on the ground."
The bottom line is that it's hard for the Fed to use banks to stimulate the economy when everyone is trying to pay off debt, and when there is no flexibility on the fiscal side.
But in an election year, no one can be counted upon to lay aside the partisan feelings and admit that there is simply a limit to what the Fed can do.
And now that his confirmation hearing has slipped into an election year, Mr. Greenspan can expect a rough probe of his soft spot: his Republican party links. Mr. Greenspan was chairman of President Ford's Council of Economic Advisers from 1974 to 1977, and played a behind-the-scenes role as an economic adviser during President Reagan's campaigns.
Democratic senators will want assurances that Mr. Greenspan won't cave in to White House pressure for easy money as the November elections draw near.
While Mr. Greenspan likes to keeps his distance, "once he's comfortable with people, he is very warm and sociable," says Donald Ogilvie, executive vice president of the American Bankers Association. Mr. Ogilvie has known Mr. Greenspan professionally and socially since the mid-1970s.
The Fed chairman, who declined to be interviewed for this article, is often joined by his steady companion, NBC News correspondent Andrea Mitchell. They are fixtures on the Washington cocktail party circuit. The two are also avid tennis players, taking lessons and playing matches with administration and industry leaders.
Still, acquaintances say the Fed chief rarely steps out of character - even when telling a joke.
Rep. Stephen Neal, D-N.C., recalls a cozy dinner at a conference in the Grand Tetons with three or four couples, including Mr. Greenspan and Ms. Mitchell.
The Complexity of a Scholar
"He told the most complicated joke, and it was really funny," recalls Rep. Neal, chairman of the House Banking subcommittee on domestic monetary policy, which oversees the Fed. "But what was most funny about it was the fact that it was so complex and scholarly."
And while some consider him too bookish, others point out that a commanding intellect is widely considered to be his greatest asset.
"He is an exceptionally bright person," says Mr. Ogilvie. "It all boils down to that, really."
PHOTO : FAVORABLE ODDS: Alan Greenspan is seen as a shoo-in for reconfirmation as Fed Chairman.