Region Focus

2006

 

Fall 2006

Federal Reserve - Initiation By Fire

By Charles Gerena

What the World Thought of Greenspan

The world had a different view of Alan Greenspan when he was first nominated by President Reagan to be Fed Chairman nearly two decades ago. The following quotes from news stories published that year provide a sense of the hodgepodge of opinions that prevailed in the months leading to the beginning of his tenure on August 11, 1987.

Economists

"Greenspan will be inclined toward fine-tuning, not the sledgehammer approach that [Paul] Volcker initially used."
-- David Hale, chief economist at Kemper Financial Services (Time, August 10, 1987)

"Philosophically, [Greenspan] may feel more strongly about reducing inflation than Volker did."
-- Jerry Jasinowski, chief economist of the National Association of Manufacturers (Time, June 15, 1987)

"Alan has a greater intimacy with people in the [Reagan] administration and can argue his thoughts with them."
-- Henry Kaufman, chief economist at Salomon Brothers (Time, August 10, 1987)

Wall Street

"Volcker had credibility. Greenspan will have to grow into it."
-- Frederick Joseph, chief executive officer of Drexel Burnham Lambert (Time, June 15, 1987)

"The most important thing [Greenspan] has to do is give the markets convincing evidence that he is free of influence from the White House."
-- John Heimann, vice chairman of Merrill Lynch Capital Markets (Time, June 15, 1987)

"'The markets have made a mistake if they think the White House may have more influence on the Fed. It will be the other way around."
-- Robert Hormats, vice president at Goldman Sachs (Time, June 15, 1987)

Washington Political Establishment

The nomination of Greenspan is "a real watershed. President Reagan has now succeeded in turning the Fed into an arm of the administration."
-- Pierre Rinfret, former Nixon administration economic adviser and Wall Street consultant (Time, June 15, 1987)

"The country is very fortunate to have a man of Alan Greenspan's character" to replace Volcker.
-- Sen. Minority Leader Robert Dole [R] (Wall Street Journal, June 3, 1987)

Greenspan "would not have been my choice. One day, we'll have a Federal Reserve Chairman whose primary interest is in keeping interest rates low."
-- House Speaker James Wright [D] (Wall Street Journal, June 3, 1987)

Abroad

"Greenspan has to prove himself." Until Mr. Greenspan establishes his counterinflationary credentials, "the Fed will have to have a tighter monetary policy than would otherwise be the case."
-- David Osman, economist at James Capel in London (Wall Street Journal, June 3, 1987)

In global monetary affairs, "Greenspan is a totally unknown quantity. Volcker also has a good rapport with his central-bank counterparts around the globe, which Greenspan clearly lacks."
-- Dimitri Balatsos, economist at Kidder, Peabody & Co in London (Wall Street Journal, June 3, 1987)

"(We) don't think there will be much difference between Greenspan and his predecessor. Greenspan is a person who espouses a very orthodox way of thinking in economic policies."
-- Hiroaki Tsutakabe, analyst at Sanwa Bank (Wall Street Journal, June 3, 1987)