The "Master of Garblements"

In a brief discussion with Dr. Edward Leamer, UCLA Economist and Director of the Anderson Forecast, the other day, the whole idea of former Fed Chairman Alan Greenspan and the word "mess" in the same sentence was something of a nonstarter.

Not that I tried to start anything, but, when asked, I offered a few thoughts (perhaps more on this subject sometime next week.)

As is the case for many other economists, it must be difficult to accept any criticism of one of the leaders in your field.

That's understandable.

Judging by his new book, Robert D. Auerbach doesn't seem to have that problem as he recounts major instances of Fed mismanagement exposed by Henry B. Gonzalez (D-TX).

He has some harsh words for not only all Federal Reserve Chairmen over the last 30 years but for the institution itself.

Caroline Baum at Bloomberg explains:

As chairman of the House Banking Committee from 1989 to 1994, he relentlessly pressed for public scrutiny of what he called a secretive agency wielding enormous power, writes Robert D. Auerbach in his convincing first-hand chronicle of Gonzalez's battle, ``Deception and Abuse at the Fed.''

Auerbach, who teaches at the Lyndon Baines Johnson School of Public Affairs of the University of Texas at Austin, did two stints as a staff member of the House Banking Committee. His time there spanned four Fed chairmen: Arthur Burns, G. William Miller, Paul Volcker and Greenspan.

None of these chairmen comes off well here. Greenspan, ``the master of garblements,'' fares the worst. His ``skill in presenting imprecise, sometimes near-meaningless, conflicting, yet learned-sounding views won him over-the-top adulation for his insights and abilities,'' Auerbach writes.

These evasions and deceptions allowed Greenspan to avoid accountability, which is the thrust of Auerbach's critique. The Fed has 19 decision makers -- seven governors in Washington and 12 regional bank presidents. They are accountable to no one.

The party host/bartender analogy is as good as ever here - as long as everyone's having a good time, no one really cares who the host is or how they provide the liquor.

Once the booze stops flowing and everyone starts sobering up - that's when people start asking questions.