Months after he was written off by many as ineffective, a political hack or even approaching senility, Alan Greenspan is having a quiet revival. Not only has he secured an appointment for another term as Federal Reserve chairman, but Greenspan is once again pulling the strings that control the global economy. Moreover, he's doing so with great skill, much to the surprise of his many critics. Despite a popular belief the Fed chieftain has become toothless in the postbubble era, recent history suggests the "maestro" is proving to be a puppet master, too. "I would say
Greenspan's been very clever," said Paul Kasriel, chief U.S. economist at Northern Trust and an unabashed Fed critic. "He's getting what he wants." What Greenspan wants, in simplest terms, are higher equity prices, to curtail the decline in household wealth and re-establish business confidence, and low mortgage rates, to keep housing and refinancing activity strong in order to bolster consumer confidence and spending. Following Wednesday's action, the S&P 500 is up 27% since its October lows and the Nasdaq Composite has risen by a whopping 47%. Meanwhile, the benchmark 10-year Treasury is yielding 3.29%, its lowest level since 1958, while the Mortgage Bankers Association reported record levels of both refinancing and new-mortgage applications. Greenspan also desires risk-taking and wants disincentives for individuals and businesses to keep their cash. Rock-bottom money market rates and big gains in many small-cap and speculative stocks, often mutually exclusive, suggest that wish is coming true, too. Not bad for a guy supposedly all washed up. Buoyed by such successes, even if he's not roundly credited with them, Greenspan seems to be getting greedy. Some observers suspect his hints at another rate cut in Tuesday's speech were aimed mainly at the European Central Bank, whose rate-setting body meets Thursday. Greenspan wants his European counterparts to stop dawdling and loosen monetary policy.