Greenspan Rattles Market With R-Word

Federal Reserve Board Chairman Alan Greenspan testifies on Capitol Hill in this April 21, 2005 file photo. During the 18¿ years that Greenspan was chairman of the Federal Reserve, he scrupulously avoided forecasting recessions. Now it seems he can't stop using the R word and that has created headaches for his successor. (AP Photo/Stephen J. Boitano, File) (Stephen J. Boitano - AP)

"This is Greenspan being Greenspan. His favorite pastime is forecasting the economy," Jones said.

Since leaving the Fed, Greenspan has been delivering speeches for money to private groups and working on a book due out in September titled, "Age of Turbulence."

In an interview last week with the Wall Street Journal, Greenspan said in his appearances he had avoided answering "any questions which refer directly to monetary policy, what the Fed is doing or what it should do."

Until last week, Greenspan had been largely successful in keeping his views out of the headlines after a bad experience just days after leaving the Fed in 2006 when he roiled markets with comments he made at a private event for a small number of clients of Lehman Brothers.

Published reports say Greenspan is usually paid $150,000 for his speaking engagements. To keep from being a competing voice to his successor, he has provisions in his speaking contracts that reporters can't be admitted and no recordings of the event can be made.

Those restrictions, while keeping Greenspan's comments more private, also work to the advantage of the investors who are putting up big bucks for the appearances by making the time with Greenspan more exclusive.

Analysts contend that it is naive for Greenspan to believe that his views, especially on such hot-button topics as recessions, won't quickly gain a wider audience.

"Greenspan is entitled to make a living, but even when he thinks his comments are not on the public record, they will be because people will talk," said Lyle Gramley, a former Fed governor who is now with Schwab Washington Research Firm, an economic consulting firm.

Among economic forecasters, Greenspan's views on a possible recession are pretty mainstream. His one-in-three probability is only slightly more pessimistic than the 20 percent to 25 percent chance of a downturn that other forecasters are using.

But other forecasters, who have not been Fed chairman, think Greenspan may have learned from this recent episode and may more carefully chose his words for his next speaking engagement.

"I think Mr. Greenspan miscalculated on the amount of attention he would get," said Mark Zandi, chief economist at Moody's Economy.com. "I think he will go back under the radar screen for awhile and allow Mr. Bernanke to have more time to establish his own forecasting credentials."

___

On the Net:

Federal Reserve: http://www.federalreserve.gov