Woodward is our guide through an extraordinary inside look at the making of policy. We get a feel for the enormous power of the Federal Reserve and the great power that Chairman Greenspan has. (Very interesting reading - I had no idea that the decision making process within the Fed is such a chaotic process!!) Woodward explains the workings of the Federal Reserve in such a way that the lay reader is able to appreciate the effort of Greenspan and his colleagues. Together with the glossary on page 230-234 this book is a quick and entertaining read which touches on many interesting topics. This book is a good source as an *introduction* to Greenspan and the politics inside the Fed. On the flip side, with its' 200+ pages, this book cannot be more than a brief introduction to the Greenspan world. I don't think that the author goes deep enough into the material to give justice to Greenspan as a leader, to his economic skills, nor to his ability to carry out policy.
Something that always has troubled me with Woodward and his writing is that he does not cite his different sources! This means that I as the reader cannot decide for myself what kind of prejudice and/or bias that might be present in the material that he quotes in his books. This is something I find extremely annoying!
On a more personal note; I think it is strange how a "fling" in the White House can overshadow an event of such great magnitude like the potential meltdown of the world economic system in 1998 really was. The Fed's was desperate for attention, to the extent that Paul Kanjorski, democrat from Pennsylvania, suggested injecting some sex into the Fed's so that they could get more media attention!!
[A tip to the author/publisher: It would have made more sense to place the glossary pages *in front* in this book, rather than in the back where it is currently placed. For the lay reader without at least some economic background it is useful to read this page and acquaint with the different expressions *before* reading this book. As it is now, one finds it after finishing reading the epilogue!].
To the potential reader of this book, let me give you two cautions. If you like exciting reading, go elsewhere. Economics and monetary policy are pretty boring stuff, and the way they are treated here makes them more boring than they have to be. Second, if you want to learn about the significance of Dr. Greenspan's role at the Federal Reserve, skip this book. It misses the target in that area.
Mr. Woodward, by comparison, is lucky I gave him 3 stars. The man treats biography as though he is uncovering the Watergate scandal, and the end justifies the means. For example, he does not cite sources. This means that the reader cannot judge for her- or himself what bias may be present in the material being quoted. For example, the first pages of the book slam James Baker in every possible way short of accusing him of being a pedophile. Who is this source (or sources) who is (are) providing the dirt? What do they have to gain by blackening Mr. Baker's reputation? I would like to know before I take the information seriously. Any other biographer or historian would tell you.
The second problem is that Mr. Woodward does not seem to know very much about economics or the Federal Reserve System. For there is little about either subject in a book that primarily focuses on Dr. Greenspan's role at the Fed. For example, the book does not even describe all of the legislative objectives that have been set for the Federal Reserve by Congress. The Humphrey-Hawkins legislation about encouraging full employment is first mentioned more than half-way through the book. Those who are not familiar with the subject wouldn't have guessed that Dr. Greenspan was supposed to be addressing this subject and was reporting to Congress regularly on it as Mr. Woodward reports on what Dr. Greenspan was doing to fight inflation.
Now, most will agree with me that economics is a pretty difficult subject to write about. But Mr. Woodward could have written about someone else rather than Dr. Greenspan. In this book, economic events, thoughts, and analyses are usually treated as either minor background events or as gossip items to reflect on personal qualities. As such, the economic events and implications are greatly oversimplified. For example, I doubt if many readers can understand the obscure references in the book to Dr. Greenspan's successful search for the missing service productivity measurements. At a minimum, Mr. Woodward needed a coauthor who is an economist to add some depth related to the book's treatment of Dr. Greenspan's work.
A third major problem with the book is that Mr. Woodward makes a great deal out of unused contingency planning in crises. These are dropped on the reader to suggest we were a hairs-breadth away from financial Armaggedon. That is like reporting the fact that we always had bombers in the air with nuclear weapons during the Cold War as suggesting that we were always about to bomb the USSR. All government agencies are always preparing for contingencies that will never occur. That doesn't mean that the contingencies are imminent. Mr. Woodward, for example, tries to make a case for having us think that President Reagan might have closed down the New York Stock Exchange in 1987 and that it could have taken a week to reopen. This is pure sensationalism in my view. It probably helps sell books.
The strength of the book is based on the fact that the Federal Reserve releases the transcripts of its deliberations. Mr. Woodward has liberally used these transcripts to give you a flavor of the consensus-building process he uses to lead in creating policy and interest rate decisions by the Fed. This raw material in interesting, even if Mr. Woodward's characterizations of these transcripts frequently are not. He makes a great deal about differences between Alan Blinder and Dr. Greenspan. That is much ado about nothing, and simply makes the book longer. Achieving consensus in Dr. Greenspan's Fed is a lot like the EDS television commercial about cowboys herding cats, especially after President Clinton began making appointments to the Fed.
One of Dr. Greenspan's great strengths is his approach to preparing for decisions. He is unusually open-minded, willing to listen, and eager to get better information. This makes others more willing to listen to him, and to pay attention to this views. It also allows him to improve his own views in useful ways. The book does a reasonably good job of exposing the benefits of this approach.
In two other minor areas, the book is clearly deficient. Mr. Woodward fails to discern the usefulness of Dr. Greenspan's complicated communications. You can read whatever you want into them. The Federal Reserve chairman is required to make more speeches, deliver more testimony, and to answer more questions than just about any other public official. Usually, the best result is to have to no impact on the financial markets. Dr. Greenspan is brilliant in performing these tasks in a neutral way. To listen to Mr. Woodward, you get a sense that Dr. Greenspan's convoluted communications are solely some sort of genetic defect acquired from his father.
Mr. Woodward does notice that stock price levels are high, but fails to fully appreciate how much the surging markets reflect a failure of Fed policy. Clearly, the interest rate raises we have going on now have been aimed more at the stock market (in a preemptive strike against future inflation) than against anything else. How will it all turn out? Much of Dr. Greenspan's final reputation will be determined by this open chapter in the story. I wish him well.
After you have finished reading this book, I suggest you consider the next biography you plan to read. Ask yourself these questions: What does the biographer have to know about to be competent in this area? Who would be an ideal biographer? How much time needs to pass before a reasonably objective and complete biography can be done? As a result, you may find your choice of subjects more limited than you like. Certainly, this book would fail these tests.
As for Mr. Woodward, please go back and write about crooked politics. You do that well, and your methods and skills are more appropriate there.
Woodward has already been blessed with his 15 minutes of fame. His latest work, "Maestro: Greenspan's Fed and the American Boom," represents neither earth-shattering importance nor an erudite treatment of his subject, Alan Greenspan and his reign over the Federal Reserve.
To its merit, "Maestro" does shed a surprising amount of light on a once mysterious and self-consciously secretive organization. The inner-workings of the Fed and its policy-making are depicted with excellent detail, as Woodward takes the reader through the bumpy rides of setting interest rates from 1987-2000. And for non-economic types, Woodward does a pretty decent job explaining how monetary policy works and what the implications are for increasing interest rates or expanding the money supply.
Yet it is a shame Woodward is not an economist himself because his book suffers from a lack of depth on certain issues. The work's treatment of developments over the last decade, including the savings and loan scandals of the late '80s and the Asian financial crises of the '90s, is rather superficial.
What is most bothersome about Woodward's work is its failure to point out many of the negative conclusions the details of the work might necessitate. The author's editorial on his subject is one of pure praise, as he attempts to elevate the status of Greenspan to that of a modern hero. The truth is far more complicated than the rose-colored picture Woodward would like to paint.
One of the scariest points Woodward's book fails to make is that the position of chairman of the Federal Open Market Committee is perhaps the most powerful seat of economic policymaking in the United States. Many students of the Fed's operations grow up believing that interest rates are set by the democratic vote of a committee of economists. In reality, the monetary power of the last 13 years has rested in the judgement of one man.
Greenspan's career epitomized the struggle to push the envelope on limitations to power. The chairman was the master of the FOMC, and before each meeting, he polled and called every member to figure out each one's stance on whether to raise or lower interest rates. Since the chairman always speaks last at an FOMC meeting, Greenspan often could plea for the universal support of his decisions, and his careful rhetoric frequently was enough to achieve the policy outcomes he desired. There were even times from 1988-1999, when the committee voted to allow Greenspan to make minor adjustments in the Fed Funds rate between meetings, giving him complete monetary control.
We are all lucky that Greenspan has handled the responsibility of his power with such sobriety. What if Greenspan had not been so judicious? An America where the sovereign economic policymaker was a bumbling idiot would resemble the despair of 1929, when interest rates were raised even after the stock markets crashed. The very idea that determining the Fed Funds rate could rest in the hands of a moron is a scary thought.
Another frightening notion Woodward doesn't elucidate is the number of problems with the way our system allocates its human capital. Many of those on the FOMC were there simply because they had political ties and connections. If Greenspan were to resign tomorrow, party friendships and political allies could influence the new appointment.
Often when economic policymaking is submerged in politics, short-run prosperity is prioritized, and little thought is given to where things will head five or 10 years down the road. If we had a Fed chairman who - because he was a pawn of politics - strove for break-neck growth without regard to price stability, disaster could occur. Woodward strives to make the point that Greenspan always has tried to put his job above factionalism, but Woodward fails to recognize that future Fed chairmen may not behave the same way.
Overall, Woodward's "Maestro" gives a decent overview of the history of economic developments and monetary policy in the last decade. The book's flaws lie not in the display of facts but rather in its pure, unquestioning praise of its central figure, Alan Greenspan. I would not disagree with statements that Greenspan has done his job especially well. He, however, has been fortunate, as circumstances beyond his control contributed to the record expansion of our economy and our subsequent prosperity. Greenspan's ability as Fed chairman surely will be tested as our economy slows, and whether we continue to prosper will determine if he really has, as Woodward says, a "mastery of process."