Alan Greenspan, entering his stretch run as the nation's central banker, was at the top of his form Wednesday. He led the Federal Open Market Committee (FOMC), without dissent, to limited money tightening that he had prepared financial markets to expect. It even started a mild bond rally. Yet formerly sycophantic financiers were not pleased by the Federal Reserve chairman's tour de force.

Henry Kaufman, the 76-year-old archetypal Fed watcher, set the tone by declaring: "I believe the Fed is behind the curve." In a chorus of complaint, bond traders and currency speculators assailed Greenspan for moving much too slowly. They grumbled that the increase of 25 basis points in the federal funds rate, to 1.25 percent, was too little too late -- especially too little. To stave off inflation, said these critics, the Fed should be raising interest rates in much larger increments.

Since the numbers show inflation under control, why the agitation for super-tightening? One reason is that it's hard to make real money in the markets when the central bank is toying with incremental changes. The big payoffs result from large swings, up or down. But there is a darker reason for finding fault with Greenspan: His plan does not help Sen. John Kerry defeat President Bush.

New York's great financial houses are filled with Democrats who are determined to drive George W. Bush out of the presidency. Old hands who keep an eye on Wall Street have never seen such partisan fervor. The real trouble with Greenspan is that he poses no threat to Bush and is no help to Kerry.

Shrugging off the central banker's aura of mystery, Greenspan lately has operated with a transparency that permits markets to adjust to Fed plans. The 25-basis-point increase in June was telegraphed well in advance. Another 25-basis-point advance is scheduled for August, probably ending preelection tightening. That will not be enough to validate claims by Gene Sperling, President Bill Clinton's national economic adviser and now Kerry's economic strategist, that federal budget deficits inevitably produce ruinous interest rate increases.

Never before has Greenspan led so unified a Federal Reserve. It was expected that his incremental approach would lose at least one FOMC voting member: William Poole, president of the St. Louis Federal Reserve Bank and a conservative anti-inflation hawk. A product of the University of Chicago, Poole once was an adjunct scholar at the libertarian Cato Institute and a member of the Shadow Open Market Committee second-guessing Fed policy. But Poole joined Greenspan last week in a 12 to 0 vote.

Greenspan's dominance can be traced in part to the way he shaped the current Federal Reserve. He has loaded it not with experts in monetary policy but mainly with generalists -- such as Vice Chairman Roger Ferguson, a former New York attorney. Timothy Geithner, a former International Monetary Fund and Treasury official who became president of the New York Fed in November, lacks the influence of his predecessors in that post.

Ben Bernanke, the one Fed governor put on the board at the Bush White House's initiative, is an esteemed theorist on monetary policy who wants to set inflationary targets for the central bank. Since he is solidly on board with Greenspan, Bernanke does not see the imminent danger of inflation perceived by Kaufman and other sharks of Wall Street.

Kaufman, who at his influential peak two decades ago was known as "Dr. Gloom," was quoted last week in the New York Times as saying that Greenspan's gradualism may be good for the economy but not for "constraining inflation." That is the old-time Wall Street religion -- the economy be damned in a world made for bond traders.

What the Fed says, however, is there is no need today for Kaufman's choice between stagnation and inflation. Fed sources see the inflationary growth rate at only 1.7 percent. Given that such forecasts experience a 1 percentage point margin of error, plus or minus, inflation could be as low as 0.7 percent. Nobody sees a bubble economy racing out of control. Greenspan surely is not returning to his "irrational exuberance" description of the stock market. That's bad news for financial speculators and Bush bashers.

{copy} 2004 Creators Syndicate Inc.