A possible addition to Greenspan's client list

Caroline Baum's commentary at Bloomberg today is quite amusing. The column is reproduced in its entirety below (emphasis mine):

Greenspan's Client List Needs Someone Like Me

Dear Mr. Greenspan:

I was somewhat surprised to read that you had been hired as an adviser to John Paulson, the hedge fund manager who made a killing last year betting against the mess you made. The irony is really rich: Paying someone whose policy mistakes and missteps were the source of your success! I'm sure it will be a productive working relationship for everyone involved.

What got my wheels turning, though, was re-reading your comments about your ``Rule of One,'' as I call it. You have said that you would consult with only one client in each industry.

So far, your roster includes one bank (Deutsche Bank AG), one bond-fund manager (Pimco), and now one hedge fund. I'm sure there's some overlap in what these firms do, but my intent here isn't to quibble about details.

If I understand you correctly -- you speak much more clearly than you did when you were Fed chairman, now that you're getting paid a bundle per word -- you still have an opening for a media company. So I'd like to propose what I think could be a mutually beneficial relationship between you and, yes, me.

The benefits to you should be immediately apparent.

1. Buying Access
With each announcement of your exclusive consulting relationship with a client, the chatter is that these firms are buying ``access'': access to your institutional knowledge of the Fed; access to your Rolodex; access to any inside information you might get from policy makers in the U.S. and overseas.

The way I see it, it wouldn't be a bad idea for you to buy access -- from me. Lots of politicians see my column; maybe even a few who are running for president. I might be able to put in a good word for you that would give you a shot at Treasury secretary, an opportunity lost when Jimmy Carter defeated Jerry Ford in 1976.

Running the mint isn't nearly as glamorous as controlling the printing press, but at least it keeps you in the public eye (not that you ever left it).

2. Keep Your Friends Close, And Your Enemies Closer
Let's face it: No one has been a bigger thorn in your side than yours truly. I started my journalism career a few months before you landed at the Fed, and we've been joined at the hip ever since.

If I were on your payroll, you can be pretty sure I'd be talking you up rather than putting you down. I mean, it wasn't until Bill Gross hired you that he stopped trashing you. And you didn't even have to pay him to change his tune!

If you put me on retainer, you'll be surprised how easily I can be persuaded to see economic history in a different light.

Remember how you denied there could be a housing bubble, only belatedly acknowledging some ``froth'' in certain local markets? I've already forgotten you said that, along with your lament on how homeowners would have done better with adjustable- rate mortgages.

Or how about that ridiculously low federal funds rate that overstayed its usefulness for years, not months? I think I could make an argument, based on a ``risk-management'' approach, that it was necessary to ward off deflation.

In other words, Mr. Greenspan, money talks -- or in this case, money would encourage me to talk less, if you know what I mean.

3. Playing Cyrano to Your Christian
Just as Christian de Neuvillette used Cyrano de Bergerac's words to woo Roxane, you, sir, could use a bit more dash when it comes to preserving or, at this point, resuscitating your legacy.

No one ever accused me of being dull or uninspired. And I've always had a hankering to play Cyrano, sucker that I am for that swashbuckling, romantic stuff.

``I draw my sword and raise it high.'' ``Let me choose my rhymes.'' ``Then, as I end the refrain, thrust home!'' Oh, it will be grand. Together we can win their hearts!

4. A Better Crystal Ball
This may be a sore subject with you, but your forecasting acumen hasn't been the best. Your visibility on bubbles has been close to zero. You were late to see recession in both 1990 and 2001. Your rationalizations for your forecasts have been pretty lame as well.

Money manager Bill Fleckenstein sets your record straight in a just-published book, which isn't likely to be a coffee-table fixture in your household.

If you saddle up with me, you can get rid of all those arcane manufacturing ratios and obscure indicators you used to pull out of a hat to justify a policy action. You can do better watching two rates -- the overnight rate that the Fed sets and the long-term rate determined by the market -- than you can with the 18,500 indicators you reportedly track in the bathtub.

I'd like to thank you in advance for considering my offer. I'm ready to proceed with negotiations as soon as I hear back from you.

Very truly yours,

Caroline A. Baum

Funny. Has anyone read Fleckenstein's new book yet?

--- BONUS ---

Here's an excerpt from a Q&A session with Greg Ip at the Wall Street Journal from last September around the time that The Maestro's book came out:

Ip: At the Fed you said housing was in a froth, but you avoided calling it a bubble. From the vantage point of 2007, can you say now that it was in a bubble?

Greenspan: Oh yeah. Lots of froths are equal to a bubble… What was driving prices higher was essentially the aftermath of the decline of the Soviet Union and the fall in real long term interest rates which drove up residential prices all over the world.

Individuals whose home purchase decisions in 2005 and 2006 may have been influenced by the constant housing bubble-denials of the former Fed chairman must have been thrilled to hear this.