Maestro — Chapter 3

1. 1. Greenspan raised the fed funds rate to 9.75% in February 1989, the highest in four years, to combat inflation.
2. 2. Greenspan relied on an informal network of business contacts, including purchasing managers and CEOs, for real-time economic data.
3. 3. By mid-1989, Greenspan saw the economy slowing and began cutting rates, starting with a 0.25% reduction in June.
4. 4. Budget Director Richard Darman publicly criticized the Fed for being too tight, sparking a conflict with Greenspan.
5. 5. Greenspan believed public optimism could fuel unsustainable spending and inflation, rejecting Darman's call for cheerleading.
6. 6. Vice Chairman Manuel Johnson leaked to the press that the Fed would provide liquidity after the October 1989 mini-crash, overruling Greenspan's preference for restraint.
7. 7. The savings and loan crisis, fueled by deregulation and fraud, cost taxpayers an estimated $100 billion in bailouts.
8. 8. Greenspan had written a 1985 letter endorsing Charles Keating's Lincoln Savings and Loan as financially strong, later admitting he was wrong.
9. 9. Greenspan cultivated personal relationships with senators and business leaders to gather political intelligence and economic insights.