Maestro — Chapter 10

1. 1. Greenspan opposed U.S. loans to Mexico due to moral hazard, but later supported a package as the least-worst option to prevent global contagion.
2. 2. Rubin and Summers proposed $40 billion in loan guarantees to Mexico, applying Greenspan's doctrine of overwhelming force to ensure success.
3. 3. The Mexican crisis was resolved using the Exchange Stabilization Fund, bypassing Congress, after Greenspan and Bennett devised a strategy to ensure congressional silence.
4. 4. Greenspan pushed for a half-point rate hike in February 1995, despite opposition from Blinder and Yellen, who feared over-tightening.
5. 5. Blinder publicly advocated for preemptive easing, a strategy Greenspan later endorsed in congressional testimony, which lowered long-term bond rates.
6. 6. Greenspan cut rates by a quarter point in July 1995, the first decrease in nearly three years, aiming for a soft landing.
7. 7. Clinton approved the $40 billion Mexican loan request despite political risks, saying he couldn't sleep at night if he didn't act.
8. 8. Rubin publicly rebuked White House Chief of Staff Panetta for jawboning the Fed to cut rates, reaffirming the administration's hands-off policy.
9. 9. Felix Rohatyn argued the economy could grow faster than 2.5% without inflation, gaining Clinton's ear and challenging Greenspan's cautious approach.
10. 10. Greenspan compared the soft landing theory to Einstein's relativity, expressing pride in the economy's performance by late 1995.