Republicans seek Greenspan's counsel

Don't know how I missed this story from last week...

Alan Greenspan may have retired as chairman of the Federal Reserve, but his insight is still in hot demand, so much so that Senate Republicans invited him to be their guest speaker at their weekly policy lunch.

Per his normal practice, Greenspan declined to tell reporters what he told the lawmakers behind closed doors, but that did not stop a few senators from spilling the beans.

New Hampshire Republican Senator Judd Gregg said the former Fed chief talked mostly about the need to address the long-term budget deficit, specifically the Medicare healthcare program for the elderly and those with disabilities. The U.S. deficit is expected to crest at more than $1.8 trillion in fiscal 2009 which ends Sept. 30.

On the economy, which has been in a recession since December 2007, Greenspan apparently offered a slightly brighter picture. That would match what more and more economists are saying — that the recession is in the process of bottoming out and look for a recovery to take root in the current quarter.

If the former Fed chairman thinks the bottom is here, you can almost be assured that it's not, as his track record at forecasting barely makes for a good batting average.

As for predicting what lies ahead for the housing market, has he ever gotten anything right? He's been calling the housing bottom for about three years now after never seeing the peak until it was in the rear-view mirror.

Greenspan offered some “encouraging thoughts, banks are better off than they were six months ago,” said Nebraska Republican Mike Johanns. “On housing, if I remember correctly, (Greenspan offered) some indication that things were bottoming out, but again I think that’s reflective of what others are saying.”

One senator who has been pressing to boost transparency at the Fed, South Carolina’s Jim DeMint, said he was unable to corner Greenspan and ask him about efforts to give authority to the Government Accountability Office to audit the central bank’s operations.

DeMint’s effort earlier this month to attach a provision that would give the GAO such oversight was blocked in the Senate.

“We ran out of time, and there were or six or eight guys who jumped in front of me asking questions” of Greenspan, DeMint said. He said Greenspan’s presentation focused on the unsustainable debt level and if that was not dealt with, “we are on a collision course with disaster.”

After what's happened over the last year, it is unlikely that the "Audit the Fed" movement is going to just fade away.

There should be some fun-filled hearings over the summer and, as long as Wall Street recovers while Main Street does not, interest in what exactly the central bank has been doing over the last hundred years is not likely to wane.

ooo

This week's cartoon from The Economist: