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Greenspan increases White House visits

Federal Reserve Chairman Alan Greenspan's visits to the White House and meetings with top administration officials increased sharply after President Bush took office in January 2001, according to records released to an academic researcher under the Freedom of Information Act.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true"><p>The Washington Post</p></a

Federal Reserve Chairman Alan Greenspan's visits to the White House and meetings with top administration officials increased sharply after President Bush took office in January 2001, according to records released to an academic researcher under the Freedom of Information Act.

As terrorism and war replaced concerns about financial instability as the top-tier threats to the U.S. economy, Greenspan broadened the group of officials with whom he maintains frequent contacts to include National Security Adviser Condoleeza Rice, White House Chief of Staff Andrew Card and Secretary of State Colin L. Powell.

Greenspan, as a matter of policy, declines to publicly characterize his private consultations with other officials. The Bush officials with whom he met also declined to discuss the substance of the meetings.

But Fed spokeswoman Michelle Smith said Tuesday that Greenspan met with administration foreign policy officials to discuss international economic policy. Particularly since the U.S. invasion of Iraq last year, Middle East instability and its potential effects on the world oil supply have been key concerns. Another frequent topic is the interplay of economic and foreign policy issues in many areas.

"The chairman believes a central mission of the Federal Reserve is to contribute in whatever way possible to the stability of the American economy," Smith said. "Although they are unelected officials, the Federal Reserve must be accountable to the American people as it undertakes that effort."

Greenspan met more frequently with Treasury officials during the Clinton administration than during the Bush administration, the records show. Smith, who worked at the Clinton Treasury Department before joining the Fed, noted that international economic policymaking was more concentrated at Treasury in the Clinton administration.

Since the 1950s, when the Fed's independence was firmly established, its chairmen have generally taken pains to maintain their distance from the executive branch. The Fed's ability to conduct monetary policy without regard to political fallout is thought to be key to its credibility in financial markets.

Greenspan has always maintained public contact with administration officials. But the Fed was seen as so independent early in his 17-year tenure as chairman that some in the first Bush White House blamed him for contributing to their 1992 election loss to Bill Clinton.

President Bush said last week he is nominating Greenspan to a fifth term as chairman. This comes as the Fed has signaled it will soon start raising interest rates to stave off higher inflation.

Greenspan's frequent contacts with the Bush administration do raise questions for Kenneth H. Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania. "There's the appearance that [Greenspan] might not just be affected by economic winds, but possibly by political winds," said Thomas, who obtained records of Greenspan's appointments back to 1996 through the Freedom of Information Act, and who published his findings in an article in the American Banker last month.

Thomas praised Greenspan's performance as Fed chairman, but noted that Greenspan provided critical support for the Bush tax cuts, and now advocates making the tax cuts permanent. In a presidential election year, Thomas said, Greenspan's close contacts with the administration "become at least a potential appearance problem."

Greenspan's meetings do mark "a huge and historic shift," said Donald Kettl, a professor of political science at the University of Wisconsin at Madison and author of a book about political influence on the Fed.

Kettl said the Sept. 11, 2001, terrorist attacks and subsequent war probably led to more discussions between Greenspan and foreign policy officials "because of the fear that terrorism could have a dramatic impact on the economy." But even accounting for that, the numbers indicate "a stunning rise and increase in the level of communication, and one only wonder what they were talking about," Kettl said.

Fed chairmen have been very careful to "avoid deals or the appearance of deals" with an administration, Kettl said, "because financial markets were always waiting for signs that the Fed had crawled into bed with the Treasury, which would mean high inflation."

Tom Schlesinger, executive director of the Financial Markets Center, a nonprofit organization that seeks to educate the public about the Fed, said that without more information about the content of the conversations, "It's hard to tell what conclusions you could fairly draw from the fact that the number of meetings have gone up."

However it is clear from Greenspan's public comments in recent years that he has been concerned about the effects of "geopolitical tensions" on the global economy, U.S. financial markets and American businesses and households. He told members of Congress early last year that the Fed was struggling to determine how much of the economy's sluggishness then was due to uncertainty about global oil supplies, terrorism and other international risks, and how much was due to underlying domestic economic developments. He and other Fed officials worried then that another serious shock could derail the halting recovery.

The picture of Greenspan scouring the Bush administration for details on global developments fits with his public image as a man with a voracious appetite for economic information. He is well known for immersing himself in obscure economic measures and dispatching Fed staff to canvass businesses about their plans.

But Greenspan's methods clearly changed after Bush took office. The Fed records show that Greenspan has called on the White House Council of Economic Advisers about as often during Bush's years as he did in the four years of President Clinton's second term. However the number of appointments with other White House officials jumped sharply with the new administration, from an average of three per year from 1996 through 2000, to 44 per year in 2001 through 2003. The chairman has already made 12 such visits in the first three months of this year, the latest data available.

The chairman has met with Vice President Cheney at least 17 times since early January 2001; Defense Secretary Donald H. Rumsfeld, 11 times; Rice, 12 times; Card, six times; Powell, once; Deputy Defense Secretary Paul D. Wolfowitz, twice; and Cheney's chief of staff I. Lewis Libby, once, according to the Fed's copies of Greenspan's schedule.

Greenspan had at least four official appointments with Cheney and one with Rumsfeld before the attacks on the World Trade Center and the Pentagon, according to the Fed records.

It is not clear from the records whether Greenspan might have had more such meetings, since a number of appointments are described only as "White House meeting," or "White House lunch," without specifying the participants.

Michael Bradfield, who was the Fed's general counsel under Greenspan's predecessor, Paul A. Volcker, said he could not recall any meetings between the famously independent Volcker and the Reagan administration's secretary of defense, deputy secretary of defense or national security adviser. Volcker did meet with Vice President George H.W. Bush to discuss a White House proposal to reform the financial system, Bradfield said. Volcker did not return calls for comment.

Greenspan met with Treasury officials more frequently in the past five years of the Clinton administration, an average of 55.4 times a year, compared with 45.3 times a year during the first three years of Bush's presidency.

The chairman's appointments with other government officials -- defined as department and agency heads, financial regulators and state officials -- also rose noticeably in recent years, but the pace started picking up in 1999, the records show.

Greenspan's official visits with Capitol Hill lawmakers, excluding public testimony, also have picked up in recent years, averaging about 21.3 per year in 1996 through 1998, then surging to an average of 35.8 per year since 1999.

Greenspan has known Cheney and Rumsfeld for decades, having served with them in previous Republican administrations. Before Sept. 11, Greenspan was already calling more frequently on the White House and various cabinet secretaries, including then-Treasury Secretary Paul H. O'Neill, another long-time friend from the Ford administration and private business.

"Vice President Cheney has known Alan Greenspan for many years in a variety of roles, throughout their careers, and the vice president has high regard for him," said Cheney's spokesman Kevin Kellems. "In terms of the content of their meetings, I don't know what they discuss. One would assume that a number of current issues of mutual interest would come up. But there's nothing more I can do to accurately describe them."

With Rumsfeld, "It's a personal and professional acquaintance that they've maintained over the years," Lawrence T. DiRita, the chief Pentagon spokesman, said Tuesday. "They see each other from time to time. That's not unusual. It's a meeting without an agenda. They enjoy each other's company, they respect each other's intellects, and it's private -- there's no staff in there when they meet."

Powell's contact with Greenspan is, "largely social," said State Department spokesman Richard A. Boucher. "They've come to know each other socially over the years. They don't discuss interest rate policy. But I think the secretary is always interested in how Greenspan sees the world economically, and Greenspan is interested in how the secretary sees the world diplomatically and politically."

Greenspan also has a personal connection with Wolfowitz, whose father was one of the chairman's professors at Columbia University.

Spokesmen for Card and Rice declined to characterize the content of their meetings.

Staff writer Paul Blustein contributed to this report.