The Fed's Greenspan's cozy links with Bush

The Fed's cozy links with Bush
Alan Abelson
Barron's
Monday, May 24, 2004

In case you think journalists hold a monopoly on investigative impulse, we're happy to inform you that academics can be persistently pokey types as well. As witness one Kenneth Thomas, a lecturer in finance at Wharton, the University of Pennsylvania's famed business school. Mr. Thomas has discovered that Alan Greenspan has become, in his view, too tight with President Bush.

For this startling disclosure, we're indebted to Charleston's Post and Courier, which scooped the world (or certainly the provincial slice that goes under the name of the Greater New York Area), with the story. Mr. Thomas, manifestly a brave soul, has pored over Fed data that he extracted by grace of the Freedom of Information Act and come to the conclusion that Mr. Greenspan has lent himself to undue influence by the White House.

According to his research, the number of confabs between Greenspan and Bush or Bush subalterns took a quantum leap upward in the three years from 2001 through 2003, which, of course, were the first three years Mr. Bush was in office. That was, by Mr. Thomas' careful reckoning, 67% more times than Mr. Greenspan chose to visit the White House in the 1996-1998 stretch, when Bill Clinton was the prime tenant. Of course, it should be pointed out, Mr. Clinton was frequently otherwise engaged in the Oval Office during that period, so Mr. Greenspan might not have gotten very many invites.

Evidently a suspicious type, Mr. Thomas notes that Mr. Greenspan traipsed up to the White House 55 times in 2002 and 68 times in 2003, compared with 12 a year between 1996 and 2000. He expresses curiosity about a possible connection between the step-up in such powwows and what he dubs as Mr. G.'s "flip-flop in favour of the Bush tax cuts."

Thickening the plot, sniffs this academic gumshoe, is that Dick Cheney, Condi Rice and Andy Card were included in a number of such Greenspan-White House sessions. The knock against them, he says, is that none is an economist, a grave charge that, at least at this writing, has gone unanswered.

Mr. Thomas insists, even if the meetings were convened for nothing more than a game of whist, they give the wrong impression and appearances count.

Awed by Mr. Thomas's diligence and industry, we believe Mr. Greenspan in his visits to the White House likely was engaged in some absolutely harmless activity like lobbying to keep his job. And, we're happy to note, that mission certainly has been accomplished.

- - -

The stock market continues to meander without immense conviction. The dispiriting pattern that has plagued it for it seems like months now -- a downward drift interrupted by an occasional spunky rally -- was in evidence last week. And for the same old reasons: worry about inflation, rising interest rates, spurting oil prices (which, even after a modest end-of-the-week decline caused by cooing sounds from OPEC, remain at formidable levels) and Mr. Bush's steady sag in the polls. In truth, given the miserable backdrop, the market didn't do all that badly.

Especially in light of perhaps the biggest negative of all -- Iraq. Joe Quinlan, chief market strategist for Banc of America Capital Management, put out a very worthwhile summary of what he called a truly "rough week in Iraq." It started out, as he notes, with the assassination of Izzadine Saleem, head of the woebegone nation's governing council, a murder carried out, as Joe emphasizes, at the gates of the heavily fortified occupation headquarters.

The litany of bad news included word that Iraq's oil exports dropped by nearly one million barrels a day following the early May bombing of a pipeline; publication of a poll showing both a marked rise in support for the radical rabble-rouser Muqtada al-Sadr and the belief of nearly 90% of the respondents that the U.S. troops are occupiers, not liberators; and the disclosure by the Pentagon that 4,000 troops would be shifted from South Korea to Iraq, sorry confirmation of how stretched our forces have become.

The worst may still be to come. After June 30, when governance is supposed to be transferred to the Iraqis, he observes, "the global markets could be left confronting a civil war or anarchy in the heart of the Middle East." Not, need we say, a comforting prospect.

Against this dismal background, Joe thinks investors would be well advised to stick to defensive issues like energy, health care and consumer staples. Trouble is, most energy and health-care stocks just aren't very cheap any longer.
------------------------------------

http://www.canada.com/national/nationalpost/financialpost/story.html?id=bb62f3bf-8287-4316-a7e4-07684646467e