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Reply To: Greenspan Should be Fired Immediately

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By JrByrdmann
January 5, 2001

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Clinton needs to fire him now before he leaves office.

Clinton cannot fire Greenspan. Board members are appointed to 14-year rotating terms (i.e., one new member every two years) by being nominated by the President and confirmed by the Senate. Board members may only serve one term, unless they are appointed to fill an unexpired term, then they may serve one full term after the initial expiration. In order to preserve continuity, removal from the Board can only be accomplished by a vote of the Board. The most that Clinton could do is request his resignation (which he would be incredibly stupid to do in the last two weeks of his administration). Greenspan's term runs until 2006. He is currently Chairman, which is appointed from among the board members, and was just reappointed last June, so his term as chairman runs until 2004. Much like judgeships, once appointed it is very difficult to remove a member of the Board of Governors.

Greenspan was originally nominated to fill an unexpired term by Reagan, who also named him as Chairman, was renamed Chairman by Bush, was nominated to fill a full term by Clinton in 1992, and was named as Chairman in 1992, 1996 and 2000 by Clinton.

Greenspan played a dangerous game with this economy and jokingly tried to so called "cool the engine jets" last summer causing most companies to falter and warn.

The FOMC, of which the Board makes up a majority and Greenspan also serves as Chairman, did vote to raise interest rates in order to slow the economy. Greenspan cannot raise rates on his own, and I can recall at least two times in the mid-90s where he was calling for rate changes and the board voted against him.

Greenspan has no business with such massive ability as to manipulate the worlds largest economy and kill a bull market as he did.

The bull market was based on many people's misguided assumption that the growth rates of 1998 and 1999 could continue to accelerate to infinity. Greenspan, and the rest of the FOMC are REQUIRED to "foster the long-run objectives of price stability and sustainable economic growth." In other words, it is EXACTLY his business to manipulate the economy in the way he has done it.

Greenspan should be relieved but then again it was probably Bush who wanted to wait until after he was sworn in to cut rates.

Bush has no control or influence over Mr. Greenspan. The timing of the rate cut is immaterial because it will be months before it is felt in the real economy. Anyone who didn't expect the 6 rate increases to eventually lead to reductions in corporate earnings doesn't understand basic economics.

It has been very enlightening watching one stock after another fall off its lofty perch after several 100% runups in the price. There are many companies that are still setting new highs, but these are the ones that have been plugging along with 10% y-y growth rates. The bad news for me is my initial buys were back in March and April when things were at their peak, but the latest situation has been a buying opportunity for me, and I learned a lot while watching the value of my portfolio drop by 40%.

Greenspan had no choice but to forego Bush and cut now.

The additional indicators have shown the slowdown to be happening faster than is desired, so the FOMC decided to ease off on the brakes somewhat. So, yes they did have to cut rates to avoid a recession. What Bush wanted is really immaterial.

Bush wanted Clinton to look bad going out to. (sic)

Clinton looks bad without any help from Bush or the Fed. His use of the Office of the Presidency to feed his narcissistic desires sealed his fate for him. He refused to step up and take responsibility for actions of his administration, and worse, refused to hold those under him responsible for their actions as well. With no accountability, the administration tried to run around doing whatever it wanted. This has led to Congress taking over the leadership role for the country.

These games have damaged the economy.

The economy is doing just fine. The actions of the FOMC did reduce corporate growth rates, which in turn were reflected by lower stock prices. The stock market is NOT the economy. One interesting thing, I looked at the 5-year charts for several large-cap stocks that have been hit hard lately, and if you look at the curve from 1995-1998 and continue that curve to 2001, the prices are about where they would have been. 1999 and 2000 were an anomaly of ridiculous price growth followed by a quick return to the norm. I think the biggest cause of this was the advent of day-trading causing people to "invest" based only on the day-to-day fluctuations of a stock rather than any fundamental reason behind the company. Last year, the time finally came to pay the piper, and prices have returned to the more proper location (some of this is still taking place).

I have previously responded to your rants about Steve Case, so won't waste any more space here rehashing that argument.