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  • Cartoon: "Reading Mr. Greenspan"
  • Greenspan was appointed Fed chairman in 1987.
  • Bob Woodward said that Clinton followed Greenspan's lead on economic matters.

    From the Fed

  • Recent testimony and speeches by Greenspan and other Fed officials.
  • Minutes of previous Federal Open Market Committee meetings.


    The Shy Wizard of Money

    AP Photo By Linton Weeks and John M. Berry
    Washington Post Staff Writers
    Monday, March 24, 1997; Page A1

    Alan Greenspan, chairman of the Federal Reserve, and Arthur Levitt, chairman of the Securities and Exchange Commission, were playing golf early one morning at the Chevy Chase Club.

    Greenspan told this joke: Three patients at a mental institution wanted to be released. The head psychiatrist gave them a simple test, What is two plus two? The first patient said, Five. The second, Wednesday. The third got it right. Four, he said. The first two patients returned to their ward. Patient 3 was free to go.

    By the way, asked the doc as the man was leaving, how did you know the answer?

    Easy, said the patient. I just added five plus Wednesday.

    It's an old gag. Simple, straightforward, somewhat politically incorrect, but it says a great deal about Greenspan. He understands the power of language. He is fascinated by numbers. And perhaps he's not the drab, dreary guy people might think he is.

    Some folks, especially money managers who shovel vast amounts of cash from one pile to another, think about Greenspan a lot. They watch his every word, mark his every move, graph his every grin. Because second to the president, Alan Greenspan is arguably the nation's most powerful person. As chairman of the Fed, he guides U.S. monetary policy, adjusting short-term interest rates to change the cost of borrowing for almost everyone, and with a couple of choice words he can momentarily send the stock market to heaven or hell.

    Tomorrow, Greenspan will preside over the mysterious ritual that is at the heart of his power. The Federal Open Market Committee, the Fed's top policy-making group, will gather here to debate whether to raise short-term interest rates for the first time in two years. Greenspan's testimony before the Joint Economic Committee on Thursday suggested that rates likely will go up, but even the most careful Fed watchers can't be sure what the wizard of monetary policy will ultimately opine.

    Whatever Greenspan decides, two things are certain: He will carry his Fed colleagues with him, and the financial markets will respond.

    He is a peculiar wizard, at once secretive and highly social. By night, he shows up at one Washington social whoop-de-do after another—everything from Jack Kent Cooke's box at RFK Stadium to the Gridiron Club dinner. And on April 6, this quiet, private man is marrying NBC-TV's high-profile reporter Andrea Mitchell, 50, who has been his companion for more than 12 years.

    The Fed chairman is everywhere and nowhere at the same time. He is as omnipresent as sand but as forthcoming as a sea sponge. And that may the secret of his success. Greenspan is as close as Washington comes to pure mind. Cool and controlled, he takes in the world as data bits, sifting through what he needs and sorting out what he doesn't. Society flows past him, washes over him. He's there at the party, but he's not. He's engaged at the hearing, but he's aloof.

    He is, perhaps more than any other public figure, off in his own world.

    An enigmatic chairman
    Trying to write about the World of Alan Greenspan is a tricky business. In many ways he can be helpful. He allows his friends to talk to reporters—sometimes. He will set the record straight. But he has never called a news conference while at the Fed, and he refuses to be interviewed on the record.

    Trying to read the 71-year-old chairman is even more difficult. Decoding what he says about the economy is like untangling a fishing line or untossing a salad.

    His hair is thin. He has a bemused grin when he talks. He usually wears tassel loafers, high black socks, a dark suit, a forgettable small-knotted tie and one of his pale, almost colorless shirts with a little AG monogrammed on the chest.

    He sometimes keeps one hand in his pocket, jingling a fraction of the $133,500 he makes every year. He seems gentle, thoughtful and quick to smile. In his woodwind voice, he rattles on about not wanting the Fed to "mislead the market."

    You can't always be sure of what he is saying.

    For one thing, his syntax is strange. As an example, here is an undiagrammable sentence from the speech he gave last December to the American Enterprise Institute, which included the passing mention of "irrational exuberance" on Wall Street that sent the Dow down 166 points. "The debates . . . over the issue of our money standard have mirrored the deliberations on the manner in which we have chosen to govern ourselves, and, perhaps more fundamentally, debates on the basic values that should govern our society." Pretty incendiary stuff.

    Nobel laureate economist Robert M. So\low of the Massachusetts Institute of Technology says Greenspan is not the first Fed chairman to employ circumlocution. "If you go back and read speeches of William McChesney Martin, or even Paul Volcker, who was a little more forthcoming, you'll find they talked pretty much the same way. They've all mastered the art of meaningless verbiage.

    "That's part of the normal manner of a chairman, to appear to be saying something while you're saying nothing at all," Solow said. "Alan is the past master of this. It's what central bankers do. They're like squid, they emit a cloud of ink and move away."

    Tales from a jazz age
    He is an only child.

    Greenspan's father, Herbert Greenspan, was a stockbroker; his mother, Rose Goldsmith Greenspan, worked in retailing.

    He was born on March 6, 1926. When he was 4 years old, his parents divorced. He was raised by his mother and grandparents in the Washington Heights neighborhood of New York. Though his mother had little money, Greenspan has told people that she was a "benevolent soul" and forever cheerful, even under trying circumstances.

    Young Alan was a shy guy from the get-go, but his mother was the opposite. She loved to dance and sing. When she walked into a party, he has said, she would sit down at a piano and steal the show.

    Rose Greenspan was a strong, smart woman—the first of many in Greenspan's life. Son and mother remained close, even after he had moved to Washington. He called almost daily and often took a train up to her home on weekends. She died in 1995.

    As a child, he gloried in large numbers. His mother would parade him out when he was 5 or so and get him to tally two three-digit numbers in his head.

    Greenspan playing tennis
    Greenspan in 1990
    playing tennis.
    (Photo By H. Naltchayan)

    He loved baseball. A left-hander, he easily took to first base. His mother taught him to play tennis. And, like his mother, he developed a deep and everlasting appreciation for music. As a student at George Washington High School, just a few years ahead of Henry Kissinger, Greenspan played the clarinet and tenor saxophone.

    Determined to become a professional musician, Greenspan attended the Juilliard School in New York, then for a year played with the Henry Jerome swing band.

    "I think I hired Alan in the early '40s," said Leonard Garment, who was the manager of Jerome's swing band for a while and went on to become Richard Nixon's law partner. "Alan played baritone sax and doubled on clarinet, flute, I believe, and bass clarinet."

    Those were the days of jazz and jitterbug. The band traveled throughout the country. In New York they played at Child's Paramount Restaurant on Times Square."

    Today in his office here on K Street, Garment recalls Greenspan as a good musician and crackerjack bookkeeper. At a time when some orchestras were forced to disband because of money troubles, Garment said, Greenspan tended the books "with great, great care." He also helped his hepcat friends file their taxes.

    After a year with the band, Greenspan entered New York University's School of Commerce and graduated summa cum laude with a degree in economics. He got a master's degree from NYU in 1949, then shifted to Columbia University to work on his doctorate.

    When Greenspan's money ran low, he withdrew from graduate school and went to work for the National Industrial Conference Board, a cheerleader for big business. He eventually earned a PhD from NYU in 1977.

    In 1952 he married Joan Mitchell, a painter. They stayed together less than a year, but Mitchell introduced Greenspan to another strong, smart woman—Ayn Rand. He was swept away by the Russian emigre's novels of ideas, such as "Atlas Shrugged" and "The Fountainhead," and her intriguing philosophy of "objectivism," or enlightened selfishness.

    Herbert G. Stein, an economist at the American Enterprise Institute and longtime friend, said Greenspan has developed his own economic philosophy and is beholden to no one. Pigeonholing Greenspan as an Ayn Rand objectivist is too simple, Stein said. "I think he's a much more pragmatic, moderate, feel-your-way-along person."

    "I don't know that deep down he believes any of that," MIT's Solow said. "I have never in all the times I've spoken to Alan or read something he has written thought to myself, 'Uh oh, there's Atlas shrugging.'‚"

    In the mid-1950s, Greenspan and bond trader William Townsend opened an economic consulting company. The firm worked quietly, offering forecasts and research to large businesses and financial institutions.

    Today, his work at the Fed is much the same as the work he did on Wall Street: trying to understand how the economy is working and what drives it; offering suggestions here and there for improvement.

    He is, however, making less money.

    "I think he's very comfortable in this power environment," golfing pal Levitt said. "Yes. I think he loves this. His political instincts are superb."

    "Alan has done an excellent job as Fed chairman,' Solow said. "But he's also been lucky. The economy has been well behaved in part for reasons that have nothing to do with the Fed. In the last two years . . . the Fed has been very skillful. A substantial part of that skillfulness is his canniness.

    "And his flexibility," Solow said. "Two years ago, most economists, including Greenspan, believed that when the unemployment rate got down to 6 or 6¾ percent, you've got to slow the economy down. We have learned that we can run the economy at 5 percent [unemployment]. That's because of Alan's flexibility."

    However, one reason interest rates are likely to rise tomorrow is that Greenspan fears such a low unemployment rate eventually may lede to higher inflation.

    Welcome to Washington
    For Greenspan, the yellow brick road to the Fed began one afternoon in 1966 when he bumped into Garment, his old friend from the jazz-band days. Garment was by then an adviser to Nixon's presidential campaign. Garment introduced Greenspan to Nixon, and they hit it off. Greenspan became candidate Nixon's director of policy research.

    Nixon tapped Greenspan in 1974 to be chairman of the Council of Economic Advisers, but, ironically, Nixon resigned about two weeks before Greenspan's position was confirmed. President Gerald Ford could have withdrawn Greenspan's nomination, but he didn't, and they became very close.

    Ford says today he thinks Greenspan's sensitivity to the public mood "comes from his exposure to people all over the country though his band's one-night stands."

    While chairman of the council, Greenspan began dating television reporter Barbara Walters. "We saw each other until I got married," Walters said. "We have continued to be friends.

    "He actually is a very sweet and kind man," she said. "I never heard him raise his voice. He is enormously patient." Other friends agreed that he may, on rare occasions, get peeved, but that he never outwardly loses his temper.

    Walters searches for words to describe him: "He is slightly absented-minded . . . he's not exuberant, but he's totally trustworthy . . . he's not formidable in person. He's a lovely soft-spoken, quiet man. . . . He laughs at himself. I've never heard him sharply cut anyone off. I don't think he has such as a thing as a personal enemy."

    During Jimmy Carter's administration, Greenspan returned to the private-sector world of Townsend-Greenspan. But when Ronald Reagan was elected president, Greenspan also took on the task of chairing the Commission on Social Security Reform, whose mission was to find a way to make the retirement system solid.

    When Fed Chairman Paul Volcker was shown the door in 1987 by President Reagan, Greenspan was waiting in the wings. In many ways Greenspan stayed Volcker's course; the prime objective of both was to make the economy more stable by reducing inflation.

    Only a few months into his term he was faced with a rolling disaster. On Monday, Oct. 19, 1987, the Dow plunged a record 508 points.

    Greenspan and the Fed helped stanch the bleeding. The Fed announced to the world that it was ready to make available whatever cash the nation's financial's markets needed to weather the storm and it persuaded various financial institutions to go about business as usual.

    As it turned out, the market crash did not damage the economy as Greenspan had feared it would and six months later he turned his attention back to fighting inflation. To the dismay of Vice President George Bush, then a presidential candidate, the Fed began to raise interest rates. That tightening, along with the Persian Gulf War, helped produce the recession of 1990-91, which many credit for Bush's loss to Bill Clinton in the 1992 election.

    Greenspan, a man for all seasons, stayed on at the Fed and quickly developed a surprisingly close working relationship with the Clinton administration.

    From the very beginning, Clinton and his advisers understood that criticizing or praising the Fed could backfire. Most Thursday mornings, Greenspan has breakfast with Treasury Secretary Robert Rubin and Deputy Secretary Lawrence H. Summers. They're relaxed occasions with wide-ranging conversations and some humor, said Rubin, who holds Greenspan in high regard. For his part, Greenspan has said he has had a very good relationship with the administration. Surprises have been few and far between.

    He even sat in the president's box, next to the Hillary Clinton, for Clinton's first State of the Union address. That frightened Wall Street, which feared Greenspan was being co-opted.

    Glimpses of a private life
    One day in the early 1980s, Greenspan, then chairman of the Social Security Commission, received a call from NBC's young White House correspondent. He and Andrea Mitchell had a pleasant chat.

    A master of the incremental move, he asked her out two years later.

    Greenspan and Mitchell
    Greenspan and wife
    Andrea Mitchell of NBC.
    (Photo By Danya Smith)

    The two had a "terrific time" on their first date in December 1984—dinner at Le Perigord in New York—but it took a while for the romance to blossom. They began to date seriously two years later. In October 1987 they showed up together at a White House dinner. Since then they've become omnipresent on the Washington social circuit.

    The only time there was ever professional tension, Mitchell said, was the night before Greenspan was renominated for the second time. They were giving a dinner party and Clinton called. Mitchell told her bureau chief later about the conflict of interest and she was absolved. Since then she has avoided covering any overlapping issues.

    Friends say the two seem completely committed to each other. "Alan obviously enjoys women," Levitt said. "He values them in their totality."

    On the phone, Mitchell tries to put her feelings for him into words.

    "One thing that's so refreshing about Alan is that he is upfront with people," she said. "He doesn't do things behind people's backs."

    "He is so supportive of me intellectually and emotionally," she said. "He's so interested in what I do, what I think. He shares ideas with me. . . . He is the least patronizing, least condescending person I know."

    She enjoys his wry sense of humor. "He loves puns. You have to have a taste for puns." And, she said, he knows how to make a good strong cup of coffee in the morning: Starbucks espresso, decaffeinated.

    Her parents, she said, are very fond of him. "They know he's been so wonderful to me." As a wedding present, they're giving Mitchell and Greenspan a Steinway.

    "It's very lonely when we have to travel and we're not together," she said, adding that neither of them likes to travel. So they rarely go on vacation. The one exception is an annual excursion to John Gardiner's week-long tennis camp in Carmel, Calif. Mitchell has taken up tennis to play with Greenspan.

    "I like playing against him," she said, "when he's not hitting his sneaky left-handed slices."

    The two do have their differences.

    Mitchell was brought up in a religious environment. Greenspan is not a religious man, but he believes in a strong moral code. And then there's the food question. "I think Alan's disinterested in food," Levitt said. Greenspan is a gourmand, not a gourmet. He prefers mashed potatoes to nouvelle cuisine.

    Mitchell, on the other hand, enjoys fine dining. At her home in Palisades in Northwest, where they will live, she does the cooking. "I've forgotten how to cook the good stuff," she said. "He's not a fancy eater."

    Greenspan is concerned about his weight. During the first part of last year he decided to lose weight and did so, shedding about 20 pounds. One day he was standing with E. Gerald Corrigan, chairman of Goldman Sachs International, when the subject of weight came up. Corrigan had lost a considerable amount not long before. Greenspan grasped the slack in his suit jacket at his waist and said he had lost 20 pounds.

    Someone asked if he wanted the name of a good tailor to have it taken in. "What! And lose bragging rights?" he responded.

    Sometimes Greenspan goes to parties strictly as Mitchell's escort, but he also takes quiet advantage of social gatherings to speak to people he doesn't normally see.

    "He always drifts off into the corner," former president Ford said. "He never projects himself onto other people."

    When he does speak, everyone listens, watching for some slip.

    Levitt remembers bumping into him at a Kennedy Center affair.

    "How are you?" Levitt said.

    "I'm not allowed to say," Greenspan replied.

    The wedding itself, Mitchell said, will be small—a few family members and close friends. Then the two will settle back into the domestic life they've known for several years.

    Two or three times a week, they attend a reception or party. Occasionally they gather with good friends like journalists Al Hunt and Judy Woodruff and World Bank President James D. Wolfensohn and his wife, Elaine.

    Otherwise Greenspan and Mitchell stay at home and work or read or watch baseball or listen to music. Greenspan likes the early Clive Cussler mysteries. His favorite music is classical—Handel, Mozart, Schubert, Brahms, Rachmaninoff. Every once in a while he will sit down at the piano and play a little improvised jazz.

    Asked if they have favorite chairs or areas in which to work, Mitchell said no, not really. "We're not very well organized."

    The truth is, Greenspan does most of his work, including the writing of speeches and testimonies, in the bathtub.

    The ritual began in the early 1970s when his back began to give him trouble. He discovered that long, hot morning baths were not only soothing, but idea-inducing. In the water he is able to indulge his obsession with the economy's statistical minutia. He has told friends that his intelligence quotient is 20 points higher at 6 a.m. than at 6 p.m.

    Once the bath is drawn, he slips in, placing his in-box from the day before nearby. For the next hour and a half he sits and reads, adding hot water when necessary.

    Meanwhile, Mitchell goes for a run or to workout in a gym.

    Living with him, she said, is fascinating. "The strangest thing is to be with someone who you think you know really well and who is weighing a monumental decision," Mitchell said.

    "I've never been able to guess," she said, "which way he's going."

    © Copyright 1997 The Washington Post Company

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