Greenspan Departing Fed With High Popularity

WASHINGTON – America has embraced Alan Greenspan with irrational exuberance.

The slight, aging economist with the supersize glasses and claymation facial expressions has inspired a symphonic overture, a country music paean and a red-hot gallery exhibition of "Alan as Art." Queen Elizabeth awarded him honorary knighthood.

"Our contemporary Greek oracle," says linguist Robin Lakoff from California.

"Larger than life," says lawyer Lanny Davis from Washington.

"This guy has become famous for being really, really brilliant and really, really smart about something, but most people have no idea what it is he does," says pop culture expert Robert Thompson from New York.

What he has done, it turns out, is manage the U.S. economy with great assurance for the past 18 years, presiding over an era of remarkable prosperity (interrupted by two mild recessions).

He has done this as chairman of the Federal Reserve Board, a powerful and somewhat mystical institution that guides U.S. monetary policy.

From that vantage, Greenspan has steered the economy through multiple international and domestic crises while keeping inflation and unemployment in check and helping the country adapt to the tectonic shifts of globalization and technology. His influence extends even into the lexicon.

Irrational exuberance? Credit Greenspan for the captivating phrase.

He said it once -- in 1996, hoping to temper the zeal of stock investors willing to pay any price. The phrase soon became part of American culture.

When Dickinson College music professor Robert Pound heard it, he decided the phrase would be the perfect title for an overture with an erratic, wild quality that he had been itching to write.

Now, as the 79-year-old Greenspan prepares to retire from the Fed at month's end, Pound has sent him a signed copy of the overture's score to honor Greenspan's work as Fed chairman.

Retrospectives, farewells and tributes to the "Greenspan era" have proliferated since the Fed chief made it known that he is retiring on Jan. 31. His successor will be Ben Bernanke, chairman of the White House Council of Economic Advisers.

Bernanke's first order of business after being nominated was to reassure the world that his priority as Fed head would be to continue the policies of the "Greenspan years." That sent the stock market soaring.

In a 93-page analysis of the "Greenspan Standard" that was released last summer, Princeton University economists Alan Blinder and Ricardo Reis concluded, "We think he has a legitimate claim to being the greatest central banker who ever lived."

Saying goodbye to Greenspan will not be easy.

Vice President Dick Cheney, trying to offer reassurance about the days ahead, spoke well of Bernanke in a FOX News interview, then added: "Besides, Chairman Greenspan is only a phone call away."

Sen. John McCain, R-Ariz., reflected the country's infatuation with the Fed chief when he was asked in 1999 whether Greenspan should be appointed to another term.

"I would not only reappoint Mr. Greenspan," McCain said, "if Mr. Greenspan should happen to die -- God forbid -- I would do like we did in the movie, 'Weekend at Bernie's.' I'd prop him up and put a pair of dark glasses on him and keep him as long as we could."

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Back when he played tenor sax in a jazz band in the 1940s, Greenspan already was helping to balance the group's books and was reading up on economics during intermission. It was Greenspan's dance band connections that later led him first to Richard Nixon and then the White House.

During a lunchtime stroll in 1966, 20 years after he had played in the Henry Jerome orchestra, economist Greenspan ran into fellow former band member Leonard Garment, by then Nixon's law partner. Garment says he introduced the two men to one another, and Nixon was impressed enough to pull in Greenspan as an informal adviser to his presidential campaign.

"Even then," Garment recalled in his memoir, "Greenspan was impressively obscure, uttering perfectly formed sentences about money and finance that were largely unintelligible to me. What came across clearly, though, was his feeling for the poetics of an arcane topic: the federal budget."

Greenspan, by then president of a New York economic consulting firm, initially resisted coming to Washington. Later, he agreed to chair President Ford's Council of Economic Advisers, serving from 1974 to 1977.

"For someone who'd spent most of his life sitting in an ivory tower, weighing tables and statistics and predicting economic trends, Greenspan had an uncanny grasp of public opinion," Ford wrote in his memoir.

Greenspan's fix on the public pulse, and by extension on larger and smaller political dynamics, has served him well, particularly since joining the Fed in 1987. His tenure there, under four presidents, is now the second-longest in history. He trails only William McChesney Martin, who was appointed by Harry Truman, and served as Fed chief for 18 years and 10 months.

Economist David Jones, who wrote a book about Greenspan and the Fed, says Greenspan once told him that, for a Fed chief, "It's almost as important to be politically savvy as it is to know monetary policy."

Greenspan's detractors -- yes, there are some -- say it is his political inclinations that have marred his record.

"One of the biggest political hacks we have in Washington," Senate Minority Leader Harry Reid, D-Nev., said last year. Reid was irritated that Greenspan had given a qualified endorsement to Bush's proposed Social Security and tax overhauls.

Princeton economist Paul Krugman has faulted Greenspan for betraying the public's trust by "repeatedly shilling for whatever the Bush administration wants."

Even among those who criticize Greenspan for backing Bush's tax cuts, many still give the Fed chief great credit for his overall record and for being the first to recognize that the U.S. economy could grow faster than previously thought without igniting inflation. As a result, the central bank kept interest rates lower and pursued a less restrictive monetary policy than it would have otherwise.

"It's a terrific legacy, and if he hadn't supported those stupid tax cuts -- it's beyond stupid: regressive and unwise -- his reputation would be untarnished," said Robert Reich, a professor at the University of California, Berkeley who was President Clinton's labor secretary.

Greenspan's grasp of changing global dynamics stems in part from his near-legendary ability to tease important but obscure information about the U.S. economy out of the sprawling federal bureaucracy and people in the business world.

Reich, in his memoir, wrote of Greenspan asking him during the 1995 government shutdown if "Cindy" could be allowed to remain on the job. Reich was puzzled, unaware of the lower-level employee to whom Greenspan was referring.

Reich recalled Greenspan explaining: "She tallies the weekly number of new applicants for unemployment insurance, and phones it in to me every Wednesday morning. Very useful data."

Greenspan soaks up such tidbits in the bathtub each morning.

The ritual "helps him to concentrate on his reading," his wife, NBC correspondent Andrea Mitchell, reported in her memoir. "It started out when he had back trouble years ago, and it's been his daily habit ever since."

Greenspan and Mitchell, whose 1997 wedding was an A-list event, long have been a fixture on the Washington social circuit, although friends insist the Fed chairman is a shy guy who would rather watch baseball at home.

He has used his social forays as intelligence-gathering missions.

"He's got his antennae up all the time," said Robert Hormats, vice chairman of Goldman Sachs International and a longtime friend.

"He is very, very good about getting lots of information from people who actually run companies, who actually make financial and business decisions. ... When he sees them socially, he'll find out what's on their minds. He does that a lot. And people in turn are very discreet and they don't turn around and say he's called them," Hormats said.

In retirement, Greenspan is expected to continue speaking from time to time and may write a book. His words are sure to continue to carry weight in Washington and on Wall Street.

But Thompson, the pop culture expert, predicts Greenspan's iconic status will fade to a point where the only ones likely to remember much about him are economists and trivia champs.

Greenspan might now be an easy answer on the "Jeopardy!" quiz show, Thompson said. "Ask again in 10 years and he'll be down in the $1,000 category."