By Robert Reich
On balance, I’m glad Joe Biden decided to reappoint Jerome Powell to chair the Fed. During Powell’s first four-year term, he shifted monetary policy away from its singular focus on preventing inflation and toward aggressively trying to get unemployment as low as possible. (Lael Brainard, whom Biden appointed to be vice chair, will be a lot tougher regulating the financial sector than was her predecessor, Randal Quarles.)
Biden’s decision made me think of Alan Greenspan, who was Fed chair when I was at the Labor Department, and of the time Greenspan invited me to lunch in his suite at the Fed.
I was still new to my job. Greenspan had been Fed chair for years. Ronald Reagan appointed him. George H.W. Bush reappointed him. Bill Clinton would reappoint him again, although Greenspan didn’t know it at the time — which was probably why he invited me to lunch. (He probably assumed I had Clinton’s ear on economic policy. And because he was a deficit hawk and I was the opposite, it couldn’t hurt his chances to try to charm me.)
We’d never met before but as soon as he greeted me I instinctively knew him. I knew where he grew up (New York), and where he got his drive and his sense of humor (he’s Jewish, as I am). I felt like we’d been together at countless weddings, bar mitzvahs, and funerals.
Our lunch was pleasant, our conversation easy. He deftly avoided talking about the deficit, jobs and inflation. I left feeling pampered and charmed. Greenspan got out of the lunch exactly what he wanted. Yet I never asked him the questions I intended to ask and never got the answers I imagined he’d give.
Here’s a version of the conversation I had anticipated:
Me: Mr. Chairman, how did a shy little Jewish guy like you get to be the most powerful man in the American economy?
He: I’m cunning and ambitious and very, very smart.
Me: You’re a Republican and follower of Ayn Rand?
He: And proud of it. Nixon, Ford, Reagan, and Bush all appointed me to powerful positions.
Me: What’s your purpose in life?
He: To stamp out inflation.
Me: Even if that means high unemployment?
He: You bet.
Me: Even if it requires slow growth and stagnant wages?
He: Right you are.
Me: Even if it means drastic cuts in federal programs that help working people and the poor?
He: Absolutely, if that’s what it takes to balance the budget and remove all temptation to inflate away the government’s debt.
Me: But why? A little inflation never hurt anybody.
He: You’re wrong. It hurts bond traders and lenders.
Me: But why place their interests over everybody else’s interest in good jobs?
He: Because I’m a capitalist and capitalism is driven by the filthy rich. They make their money off bonds. Your constituents are just plain filthy. They have to work for a living.
Me: You’re the nation’s central banker. You should be accountable to all Americans.
He: But I’m not, and neither is the Fed.
Me: That’s not fair, it’s not right.
He: Nah-na-na-nah-na. You can’t stop me.
Me: Can too.
He: Can not.
Me: Can too. The President’s my friend.
He: So what?
Me: He won’t reappoint you.
He: Oh now?
He: Well, we’ll see about that.
Me: You think he’ll reappoint you?
He: No doubt about it.
Me: Why are you so sure?
He: Because he needs me.
Me: Oh yeah?
Me: What does he need you for?
He: He needs me because he needs to confidence of Wall Street, and only I can deliver that to him.
Me: Oh yeah?
He: Yeah. That’s why Bush reappointed me in 1992, even though he hated me for keeping interest rates high as the economy slipped into recession in 1990. That’s why he lost the presidency to your man. I could do it to your man too. I could do worse. He’ll reappoint me. He’ll do whatever I want to him to.
Me: Well, you can take your crummy lunch and cram it, you robber-baron pimp.
He: Go suck on a pickle, you Bolshevik dwarf.