Maestro — Chapter 13

1. 1. Greenspan visited South Central Los Angeles with Maxine Waters, shifting her from opposing to being open-minded on IMF funding.
2. 2. Greenspan, Rubin, and Summers formed a united front before Congress, overwhelming members with economic expertise.
3. 3. Greenspan told President Clinton that the economy was the best he had seen in 50 years, driven by technology and productivity gains.
4. 4. Greenspan compared the economy's deviation from historical norms to the discovery of Pluto, suggesting unseen forces like technology and global competition were suppressing inflation.
5. 5. Former President Bush blamed Greenspan's interest rate policy for his 1992 defeat, saying lower rates would have made the recovery more visible.
6. 6. The Russian default in August 1998 caused a hidden bond market crisis, with prices dropping dramatically and trading nearly freezing.
7. 7. LTCM lost $1.8 billion, nearly half its capital, due to the Russian default and bond market turmoil, but the news was overshadowed by the Lewinsky scandal.
8. 8. New York Fed President McDonough organized a private rescue of LTCM by 16 major banks, contributing $3.6 billion to prevent a systemic meltdown.
9. 9. Greenspan was uncomfortable with the Fed's role in the LTCM rescue but publicly backed McDonough to show solidarity.
10. 10. The FOMC cut rates by 0.25% in September 1998 as insurance against global financial turmoil, despite low inflation.
11. 11. Greenspan defended hedge funds before Congress, arguing they improve market efficiency and should not be heavily regulated.
12. 12. The Fed cut rates by another 0.25% in October 1998 via an emergency conference call, calming dysfunctional markets.