Thursday, May 27, 2004

More evidence is in on how Greenspan is nothing more than a Republican shill.

Since the 1950s, when the Fed's independence was firmly established, its chairmen have generally taken pains to maintain their distance from the executive branch. The Fed's ability to conduct monetary policy without regard to political fallout is thought to be key to its credibility in financial markets.

Greenspan has always maintained public contact with administration officials. But the Fed was seen as so independent early in his 17-year tenure as chairman that some in the first Bush White House blamed him for contributing to their 1992 election loss to Bill Clinton. . . .

Greenspan's frequent contacts with the Bush administration do raise questions for Kenneth H. Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania. "There's the appearance that [Greenspan] might not just be affected by economic winds, but possibly by political winds," said Thomas, who obtained records of Greenspan's appointments back to 1996 through the Freedom of Information Act, and who published his findings in an article in the American Banker last month. . . .

Greenspan's meetings do mark "a huge and historic shift," said Donald Kettl, a professor of political science at the University of Wisconsin at Madison and author of a book about political influence on the Fed.
While the "experts" warn that Greenspan has to maintain the Fed's distance from the executive branch so as to maintain the Fed's power and credibility, it hasn't seemed to have hurt the central bank yet. Perhaps Alan learned the lesson of the US Supreme Court in 2000, which demonstrated that you can baldfacedly play the role of political hack and still maintain your power and authority with no damage to the institution itself.

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