Federal Reserve critics used to complain of "stop and go" monetary policies. They claimed that the Fed would first give a green light to the economy by making credit readily available and then turn on the red and bring growth to a screeching halt. But under Alan Greenspan that has changed. A supremely cautious man, the Fed chairman is forever blinking yellow. Indeed, his caution has become legendary within the government. He fusses endlessly over economic statistics, dissecting them in dozens of ways, probing for hours in search of potential problems. After thoroughly digesting reams of information, he often concludes that more data are needed, and when he finally decides to act, his movements sometimes seem excrutiatingly small. Such caution was evident after the recent Friday-the-13th stock market plunge. Some Bush administration officials urged Mr. Greenspan to make an immediate public announcement of his plans to provide ample credit to the markets. But he refused, claiming that he wanted to see what happened Monday morning before making any public statement. Mr. Greenspan's decision to keep quiet also prompted a near-mutiny within the Fed's ranks. A "senior Fed official" spoke on Saturday after the market swoon to both the Washington Post and the New York Times, saying the Fed was prepared to provide as much credit as the markets needed. The statement angered Chairman Greenspan, but it was greeted with applause by the Bush administration and the financial markets. And, while the mutinous Fed member hasn't gone public, some Fed governors, most notably Vice Chairman Manuel Johnson, are known to have disagreed with the chairman's decision to remain silent. Ironically, the anonymous official's comments have earned some plaudits for Mr. Greenspan, who is mistakenly seen as the source. At a hearing last week, Democratic Sen. Chris Dodd of Connecticut told Treasury Secretary Nicholas Brady that "Chairman Greenspan's" announcement over the Oct. 13 weekend was a "very important statement." Mr. Brady hesitantly replied that he wasn't sure whether Mr. Greenspan "made a statement himself, or whether that was a newspaper report." The Fed chairman's caution was apparent again on the Monday morning after the market's plunge, when the central bank took only modest steps to aid the markets. A surprisingly small amount of reserves was added to the banking system. And, by the end of that week, the key federal funds interest rate, which is largely controlled by the Fed, had settled at 8.75%, barely changed from the level of just under 9% that prevailed the previous week. Bush administration officials appear increasingly concerned that Mr. Greenspan is cautious to a fault. Signs of growing weakness in the economy, paired with indications that inflation is staying well under control, have caused them to wonder why the Fed chairman is so grudging in reducing rates. Those concerns aren't expressed in public. In fact, the administration and the Fed have been going out of their way in the past two weeks to dispel any impression that they are at odds, fearing stories about an administration-Fed split added to the stock market's jitters. Still, the split is there. The administration's concerns are understandable. The economy is showing signs of weakness, particularly among manufacturers. Exports, which played a key role in fueling growth over the last two years, seem to have stalled. Factory payrolls and production fell in September, and the auto industry and housing are in a severe crunch. But Mr. Greenspan remains reluctant to loosen policy, partly because he faces a phalanx of presidents of regional Fed banks who oppose credit easing. In addition, the chairman has a wary eye aimed a year or two down the road. Inflation may be stable at the moment, running at about 4.5%. But if the Fed eases too soon, Mr. Greenspan fears, prices may begin to accelerate again next year. Moreover, if the Fed holds tight, it may be able gradually to reduce inflation, moving toward the zero-inflation goal that the Fed chairman embraced in testimony to Congress last week. So far, Mr. Greenspan's cautious approach to policy has served both him and the nation well. His hand on the monetary tiller seems one reason why the economy next month seems highly likely to begin an unprecedented eighth year of peacetime growth without a recession. "We've gotten through two stock market crashes, and we've gone through an election without any major problems," says David Hale, an economist of Kemper Financial Services. "I think you have to give Greenspan a good rating." But such caution is no guarantee against mistakes. The Fed's reluctance to ease credit now could be laying the groundwork for a new recession, perhaps starting early next year. If that happens, Chairman Greenspan could well become an open target. Already, Congress is toying with legislation to curb the Fed's independence. If the economy turns down, such proposals could gain strong momentum.
Alan Greenspan 's caution as Federal Reserve Chairman has become legendary . He fusses extensively over economic statistics , always seeking more information . He failed to make any announcement after the October 2008 stock market plunge , claiming that he wanted to see what happened on Monday morning . On Monday , the central bank took only modest steps to aid the markets and by the end of the week the federal funds interest rate dropped only .25 % . So far this caution had served the Fed well , but there are fears that the Fed 's reluctance to ease credit could lay the foundation for a new recession , perhaps starting early next year .