From Smoking Pot to Political Heat, Fed History Yields Some Gems
This treasure house includes conversations with former presidents Paul Volcker, Alan Greenspan and Janet Yellen, whose memories span half a century and lead the world\'s most powerful central bank.
Here are some of the memories that caught our attention: Lawrence Meyer, the Fed director appointed by President Bill Clinton, who served from 1996 to 2002, in the FBI background check, he got a problem he didn\'t expect.
\"The first question he asked when I met the FBI special hours was,\" Have you ever smoked marijuana?
The question was raised suddenly.
I never thought he \'d ask this question.
I sat there, paused and thought, \"What should I say?
I can say \"no\" and no one will find out.
I had a party or two and I took a sip.
This is not important.
But I said to myself, \"No, you don\'t want to lie here.
So I said, \"Yes.
\"I explained the background.
To be honest, I had a sleepless night wondering if it was important.
Then I dreamed that I honestly saw the headline of the newspaper: \"President Clinton withdrew from the nomination --
Then I said, \'Clinton? Not a chance. ’”It was 1965.
President Lyndon Johnson is at the White House and when his driver tells him he is wanted in the United States, Federal Reserve Bank President Dewey Dane is returning home from Washington AirportS.
The Treasury Department spoke briefly with an official who \"wanted a few minutes\" of Dane\'s time.
\"I walked into his office.
The official looked up at me and said that if you vote for a higher discount rate, the president will make sure you never have another job and I will help the president.
That\'s his greeting.
He voted for it.
Governor Frederick Mishkin, from 2006 to 2008, argued that he was opposed to monetary policy decisions, but decided against them in the circumstances --
Chairman Ben Bernanke, because \"if I don\'t agree, it will bring a lot of problems to him and the agency.
My point in this case is that you provide your point of view, but you are part of the team.
However, I don\'t think there is such an obligation for the 12 regional bank governors of the Federal Reserve. Mishkin called on them to talk openly about interest rates and care \"more about getting their names in the newspaper \", he thinks it makes the Fed look bad ,.
Under Greenspan\'s leadership, the lack of information discipline is not so much a problem as his ability to really embarrass his colleagues and keep them consistent.
Mishkin said it was \"like watching a murder bill movie,\" and Greenspan \"cut off\" people who disagreed during the meeting.
From 1997 to 2005, Fed governor Edward Gramlich issued an early warning on the abuse of subprime loans, long before the housing crisis broke out.
But his warning did not provoke action to stop the credit crunch that triggered the global financial crisis. “Goddamn it.
We have to work this out and we have to work this out before the next cycle, \"said Grammy, who told the Kansas City Federal Reserve Bank meeting in Jackson Hole, Wyoming.
But Greenspan is not interested in consumer issues, \"he doesn\'t believe me,\" says Grammy, which hinders his efforts to step up scrutiny of mortgage lenders.
That was October 1979, when chairman Paul Volcker was about to adopt a new policy approach to actively raise interest rates, bringing inflation back to secrecy.
The Federal Reserve held a very unusual press conference on Saturday night, which shows that this is a special thing.
But then the central bank did not operate under the close attention of the media as it is now.
Joseph Coyne, head of public affairs, called around to ensure reporters were present.
CBS asked him, \"Is it important?
In this incident, the rare event ensured the effective appearance of the media.
Gerald Corrigan served as Fed chairman in New York from 1980 to 1984 until 1993. He was happy to think of instructing John Reid, the governor of Citibank, that his bank was in trouble and needed to raise a new share capital of $5 billion, \"otherwise I will do it for you.
Tell me what your decision is.
\"That was November 1989, after a series of massive leveraged acquisitions, the Fed began to worry heavily about bank exposure.
A month later, Reid called Corgan and said the Saudi prince
Waleed Ben Talar is ready to pay $1. 5 billion.
But Washington wants Corgan to show the Prince that there are restrictions on raising money.
\"So I went to Saudi Arabia.
I met at the airport and drove to the desert.
I don\'t know where we are.
I ended up in a tent in the desert with all the carpets and pillows, and the Prince and I had a little heart --to-heart talk. ”