00:00Betsy, welcome. You were also on the board of directors of the Richmond Fed from 1998 to 2000.
00:05That time, of course, overlapped when Alan Greenspan was was chair of the Fed.
00:10Just today, as you remember his legacy, what is it to you and to us?
00:16So a couple of things for for Chairman Greenspan, and this is both a sad day, but a day to
00:21celebrate certainly a life well lived.
00:23I think the two things when I think about him remarkably first one is communications and not in the way
00:29you might think, because he was so famous for that sort of doublespeak that nobody could understand.
00:34But he really pioneered Fed communications and the communications that we're used to today in hearing from the committee after
00:42the meetings.
00:43And then the other piece would be his his crisis management.
00:46He oversaw a number of crises and again, shepherded the economy and the country through them in ways that had
00:55not been necessarily normal operations for the Fed.
01:00Yeah, you know, it's interesting when we think about his legacy and his standing and that he really did make
01:07make a mark.
01:08I mean, what you know, I was trying I was curious about things he said more recently in terms of
01:13the market environment.
01:14And I do wonder how he was thinking about the environment where we are in today, where we question so
01:20much whether or not we will have an independent Fed.
01:23It's hard to believe that, you know, the most revered U.S. central bank globally is having these kind of
01:29thoughts or people around it are having these thoughts.
01:32Well, you know, in Greenspan's day, nobody dared challenge the independence of the Fed.
01:38And quite frankly, nobody on the Fed, Federal Open Market Committee, dared challenge Ellen Greenspan.
01:44So things are a lot different today.
01:47And and the independents, I think I still believe the Fed is going to remain independent.
01:53I've been very much heartened by Kevin Worsh's first statement since he's been there and his first press conference.
02:00I think he's made it clear that he's going to certainly carry the flag for Fed independence.
02:07You know, it's interesting that you you went to the Fed independence part of this because up up until Greenspan,
02:15the Fed had been under pressure when it when it came to its independence.
02:19I mean, certainly during the Nixon administration, I think it's it's fair to say at this point.
02:24Yeah. And and, you know, certainly Volcker came in at a time when when the Fed's lack of independence had
02:32really caused difficulty for the country and for the president.
02:35So, you know, that's the last, I think, example we have of the Fed not acting independently.
02:42And it was only when Volcker got there and really decided to move forward and conquer inflation that since that
02:51day, at least, the Fed's independence has been taken as seriously important to the country.
02:57Recently, there have been so many challenges to that, but hopefully between the courts and and also, you know, some
03:07understanding of exactly how dangerous it is to bring the Fed's independence into question and what that does to markets
03:17and investors and our economy in general.
03:20The other thing, though, you know, you think about this dual mandate, Betsy, when it comes to the Federal Reserve
03:25and, you know, not the financial markets being a part really of their mandate.
03:32Right. And and and, you know, the read by investors, the Greenspan put the expectation that if things got messy,
03:43that he would be there to shore up markets.
03:46Good thing, good thing, bad thing, you know, when you think about what the Federal Reserve is really supposed to
03:53be focusing on.
03:54Yeah. So there was always this idea that somehow the Fed would protect markets in some way.
04:03And I don't think the Fed's you know, it's certainly not in the Fed's remit to protect markets, but to
04:09provide liquidity and stability and to to make sure that that panic doesn't take hold is really the Fed's reason
04:18for being originally.
04:19So the Fed was originally formed because back before there was a Fed, you had they called them country banks
04:26at that time, country banks and city banks and the country banks would borrow from the city banks.
04:31And then if the city banks didn't have enough money or got concerned about the country banks, they quit lending
04:36to them.
04:37And then those country banks didn't have enough liquidity to operate.
04:41They would fail. And then you'd have panic around the country.
04:44So that's why the Fed has the discount window. That's why the Fed has its lending authority.
04:50And that's really, really one of the most important functions of the Fed.
04:54One of the things we talked about with Mike McKee last hour, who covers international economic and policy for Bloomberg
04:59TV and radio, was the way that Chair Greenspan changed the way the bank communicates with the public.
05:06And I'm curious now if you think, and not just the public, but markets too, net net right now, is
05:14the Fed communicating enough?
05:17Right now, the Fed's communicating probably too much.
05:21And so so Chairman Greenspan did.
05:25He originated the statement coming out after the committee meeting, after the FOMC meeting.
05:32And originally came out a little bit later than it does now.
05:35And it finally moved to being, to come out right after the meeting ended.
05:40And he also, originally it was the chairman's statement alone, and later became the committee's statement, which the committee would
05:47ratify.
05:48Before that, I actually, as a banker, took a class in how to read through the weekly publications of the
05:57Fed and try to discern where M1 and M2 and M3 were going and what the Fed was trying to
06:03do.
06:03That was all you had to go on.
06:05And so I think it is really important that the Fed communicate what it's thinking, what it's thinking about.
06:11The second thing Alan Greenspan put in the statement was something about the balance of risks.
06:16And he would, at that point, they would talk about whether they thought risks were more on the inflation side,
06:22more on the unemployment side.
06:25And, you know, again, that helped markets understand what the Fed was thinking.
06:29What has happened today, and I think particularly with the dot plots, is that markets and investors now take those
06:38dot plots as this is where rates are going.
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