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Greenspan frequent visitor to White House these days

By Nell Henderson
The Washington Post

Alan Greenspan

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Since the 1950s, when the Fed's independence was firmly established, chairmen generally have taken pains to keep 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 always has 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.

When terrorism and war replaced concerns about financial instability as the top threats to the U.S. economy, Greenspan broadened the group of officials with whom he maintains frequent contacts to include national-Security adviser Condoleezza Rice, White House chief of staff Andrew Card and Secretary of State Colin Powell.

Greenspan, as a matter of policy, declines to publicly characterize his private consultations with other officials. The Bush officials with whom he met also declined to discuss the substance of the meetings.

But Fed spokeswoman Michelle Smith said Tuesday that Greenspan met with administration foreign-policy officials to discuss international economic policy. Particularly since the U.S. invasion of Iraq last year, Middle East instability and its potential effects on the world's oil supply have been key concerns.

Another frequent topic is the interplay of economic and foreign policy in many areas.

"The chairman believes a central mission of the Federal Reserve is to contribute in whatever way possible to the stability of the American economy," Smith said. "Although they are unelected officials, the Federal Reserve must be accountable to the American people as it undertakes that effort."

President Bush said last week he is renominating Greenspan to a fifth term as chairman. This comes as the Fed has signaled it will soon start raising interest rates to stave off higher inflation.

Greenspan's frequent contacts with the Bush administration do raise questions for Kenneth Thomas, a lecturer in finance at the Wharton School of 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 going back to 1996 through the Freedom of Information Act, and who first published his findings in an article in The American Banker last month.
 
Thomas praised Greenspan's performance as Fed chairman but noted Greenspan provided critical support for the Bush tax cuts and advocates making the cuts permanent.

In a presidential election year, Thomas said, Greenspan's close contacts with the administration "become at least a potential appearance problem."

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.

Kettl said the Sept. 11 attacks and subsequent war likely prompted more discussions between Greenspan and foreign-policy officials "because of the fear that terrorism could have a dramatic impact on the economy." But even accounting for that, the numbers indicate "a stunning rise and increase in the level of communication, and one only wonder what they were talking about," Kettl said.

Fed chairmen have been very careful to "avoid deals or the appearance of deals" with an administration, Kettl said.

The picture of Greenspan scouring the Bush administration for details on global developments fits with his public image as a man with a voracious appetite for economic information.

But Greenspan's methods clearly changed after Bush took office.

The Fed records show Greenspan has called on the White House Council of Economic Advisers about as often during Bush's years as he did in the four years of President Clinton's second term.

However the number of appointments with other White House officials jumped sharply with the new administration, from an average three per year from 1996 through 2000, to 44 per year in 2001 through 2003.

The chairman already has made 12 such visits in the first three months of this year, the latest data available.

Washington Post reporter Paul Blustein contributed to this report.