Tough Love: Greenspan Does the Right Thing by Not Giving In to the Market

By damping -- if not killing -- expectations for an intermeeting rate cut today, Federal Reserve Chairman Alan Greenspan probably ruined his chances of being invited to the home of Bear Stearns economist Wayne Angell anytime soon. Greenspan also didn't ingratiate himself with most folks on Wall Street, who expressed their displeasure by sending the Dow Jones Industrial Average down 1.3%, the S&P 500 off 1.4% and the Nasdaq Composite off 2.5% to 2151.83.

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The Comp fell 22.4% in February, its third-worst month in history. The S&P 500 fell 9.2% for the month, its worst since August 1998. The Dow fell 3.6%.

But by not giving the market what it wanted (for a change), Greenspan did the right thing -- even if it resulted in more short-term pain for most investors. Perhaps, like some troubled children, the market realized it needed some discipline and responded positively (albeit mutely and delayed) to the paddling. At 10,495.28, the Dow closed about 70 points above its intraday low, while the S&P 500 closed at 1239.94 vs. its nadir of 1229.65. The Comp's session low was 2127.50. ...