WASHINGTON _ Depending on who's talking, Federal Reserve
Chairman Alan Greenspan is an unparalleled economic guru or a
To Rep. Maxine Waters, the liberal Democrat from California,
he's the latter. She leans into her microphone and tells
Greenspan in unambiguous terms that he's "brought great harm to
our economy" by raising short-term interest rates, tightening the
job market and sticking consumers with higher borrowing costs.
"Well, congresswoman," Greenspan replied, "I trust the purpose
of our action was to help, not hinder, the economy. I also trust
that in retrospect that will be materially demonstrated."
"How long will it take?" Waters demanded to know.
"Adequate time," Greenspan said softly, drawing a frown from
Waters and snickers from the rest of the House Banking Committee
in a scene typical of the Fed chief's appearances on Capitol Hill
this past winter and spring.
Tuesday night, Greenspan, arguably the world's most powerful
non-elected public official, delivered a major address to the
Economic Club of New York. His words will be scrutinized for
clues as to whether a recession lies ahead and whether Greenspan
will urge Fed policymakers to act to counter the downturn by
lowering short-term interest rates at their next meeting, July 5
Recent evidence _ housing starts, retail sales and industrial
production are down, among other signs of softness _ gives
ammunition to Waters and other Greenspan critics, mainly liberal
Democrats and organized labor. They argue that the
inflation-fighting Fed erred in raising short-term interest rates
seven times in the 12-month period ended in February.
"Those rate hikes were a mistake" that has forced people to
work more hours for less money and has pushed the economy toward
recession, declares Rep. Henry Gonzalez of Texas, the ranking
Democrat on the House Banking Committee and one of Greenspan's
Greenspan, himself, concedes the economy may be contracting in
the current quarter. If there's any growth at all this quarter,
it's "very little," he told a congressional panel Tuesday
The stalling economy is prompting a swelling chorus of voices
in Congress and on Wall Street _ as well as White House Chief of
Staff Leon Panetta _ in support of a reduction in interest rates
to prevent a full-blown recession.
"I expect the Fed to lower rates later this year, because Bill
Clinton isn't the only guy running for reelection; so is Alan
Greenspan," said Fred Bennett, a vice president for Prudential
Securities. Greenspan's term as Fed chairman ends next March.
House Democratic leader Richard Gephardt of Missouri wants
action promptly. …