Maestro — Chapter 6

1. 1. Budget Director Darman blamed Greenspan for 50-80% of the 1990-91 recession and urged faster rate cuts.
2. 2. Treasury Secretary Brady wanted the fed funds rate cut to 1% or lower, calling it an insurance policy against economic downturn.
3. 3. Brady cut off social contact with Greenspan to manipulate him, believing Greenspan's status anxiety would force rate cuts.
4. 4. President Bush met Greenspan in spring 1992 to discuss rate cuts, but Greenspan explained the Fed's limited control over money supply due to S&L collapse.
5. 5. After Bush publicly called for lower rates in June 1992, Greenspan proceeded with extra caution and proposed a mildly asymmetric directive toward ease.
6. 6. Unemployment jumped to 7.8% in July 1992, prompting a half-point cut in both the discount rate and fed funds rate.
7. 7. By September 1992, Greenspan cut the fed funds rate to 3%, the lowest in 20 years, effectively a 0% real interest rate.
8. 8. Vice Chairman Mullins was portrayed as 'the wave pounding against Greenspan' in a Wall Street Journal article, but Greenspan outmaneuvered him at the FOMC.
9. 9. Greenspan rejected the idea of holding off rate cuts before the election, calling it 'irresponsible,' but did not cut rates in October 1992.
10. 10. Mullins believed Bush lost because he failed to address inherited economic wreckage and that Brady's optimism became a 'hands-off policy' seen as indifference.
11. 11. Greenspan told President-elect Clinton that cutting the federal deficit would lower long-term rates, boost stocks, and increase employment.
12. 12. Greenspan saw Clinton as an 'intellectual pragmatist' and considered supporting tax increases on the wealthy to reduce deficits, despite Republican orthodoxy.