GREENSPAN: The Man Behind Money.

GREENSPAN: The MAN Behind Money by Justin Martin Perseus Book Group, $28.00

IN THIS AGE OF CELEBRITY, THE media was bound to give somebody credit for the current prosperity Why not Alan Greenspan the chairman of the Federal Reserve Board? Presidential hopeful John McCain spouted the conventional wisdom during primary season. Not only would he reappoint Greenspan, but if he died, "I would do like they did in the movie `Weekend at Bernie's.' I would prop him up and put a pair of dark glasses on him."

The "cult of Greenspan," as former Fortune magazine writer Justin Martin calls it in Greenspan: The Man Behind Money, is a worrisome development. With both political parties committed to balanced budgets and fiscal austerity the nation's central bank, arbiter of monetary affairs, dictates economic policy by default.

Yet the Fed minim among the least accountable institutions in American politics. It makes decision behind dosed doors and communicates with terse statements. Liberal congressmen rail against the Fed's inflation-fighting bias, reminding anyone who will listen--no one at the Fed does--that monetary policy is supposed to promote low unemployment as well as low inflation. Former president George Bush still blames the Fed's slow response to the 1990-91 recession for his defeat in 1992.

But during Greenspan's long reign as Fed chairman, which began a few months before the 1987 stock market crash, the shroud of secrecy surrounding Fed deliberations has slipped a bit In 1994, the powerful Open Market Committee began releasing its decisions on interest rates on the day they were made, and last year it began stating the Fed's bias about future moves. The minutes of those meetings are now issued within months and the transcripts are eventually made public.

With Republicans in charge of the key budget, banking, and taxing committees of Congress, oversight has given way to calling the chairmaninfor his studied opinions. Over the past 13 years, Greenspan has delivered an estimated 200 speeches and testimonies, a public record--admittedly much of it in jargon--that now comprises well over 3,500 pages.

This rich record will be of great interest to historians trying to evaluate the Fed's performance during the Greenspan years. He's overseen the longest economic expansion in the nation's history, accompanied by an unprecedented stock market boom. But Greenspan also presided over the savings and loan fiasco, one recession, one near-recession, and a series of currency and financial crises which threatened to undermine the entire global financial system.

Unfortunately, Martin chose to explore almost none of this record in this entertaining but ultimately disappointing biography. He was also handicapped by his inability to secure even a single interview with Greenspan. The result is a book that reads more like an extended magazine profile than a definitive biography. He read the clips. He talked to dozens of friends and acquaintances from more than three decades in Greenspan's public life. He delved into Greenspan's two-decade involvement in the cult surrounding free-market gum Ayn Rand. But the reader is left hungering for more--specifically, an evaluation of Greenspan's chairmanship.

Has he been lucky or has he been good? Has he been creative or has he simply followed long-standing rules for central bank conduct during crises? More importantly, what precedents has he set in the conduct of monetary policy that could help or hurt the nation in future crises? As Martin concludes, economic conditions can change in an instant and with them the Fed chairman's reputation. For the moment, we're stuck with the cult of Greenspan.

Nowhere are these failings more evident than in Martin's discussion of Greenspan's decisions during the late summer and fall of 1998. Russia had defaulted on its debts and the Long Term Capital Management hedge fund neared collapse. The Fed organized private sector rescue for LTCM and lowered interest rates three times within two months to restore investor confidence. "The crisis was successfully averted "Greenspan's savvy handling of the Asian Contagion brought together skills accumulated during a half a century as an economist and thirty years on the public stage"

It can be argued that it is not the Fed chairman's job to worry about the millions of Thais, Indonesians, and South Koreans who lost their savings and their jobs as a result of the "Asian Contagion." It can also be argued that bailing out the banks that foolishly lent unsecured cash to Nobel Prize-winning derivative traders was a necessary evil, even if it did create a "moral hazard." (Do bailouts encourage bankers and borrowers to ignore future credit risks because they know they'll be rescued from their mistakes?) Martin engages none of these questions. His standards are those of a day trader. "The boom just kept on booming, and for that Greenspan was about to receive considerable acclaim"

The bulk of the book is given over to a breezy recitation of Greenspan's life history, punctuated by occasional references to the author's core insight: Though an outspoken free-marketeer, Greenspan's public actions have been governed lay pragmatism.

A few examples will suffice. Though an adviser to the Nixon campaign, Greenspan refused to join his friend Leonard Garment in the new administration. He watched Nixon impose wage and price controls and delink the dollar from gold, which flew in the face of everything Greeenspan had though and written to that pint. Yet, with Watergate at a fewer pitch, he accepted Nixon's invitation to become chairman of the Council of Economic advisers. He stayed on with President Ford, advising him to "whip inflation now" and raise government spending to end the recession that would eventually help dump the Republicans from power.

Reagan's election afforded Greenspan another chance at the brass ring of political power. While sympathetic to the supply-siders surrounding the new president, he was seen as one of Ford's guys and remained in New York with his consulting firm. When called two years later to chair the Social Security Commission during a real crisis (the deep recession had emptied the trust fund and the payroll tax was insufficient to meet payouts), Greenspan recommended tax increases and benefit cuts. It was hardly the supply-side approach.

Much has been made of Greenspan's initial test of fire after being appointed to run the Fed: the market crash of October 19, 1987. Greenspan opened the monetary spigots to insure liquidity. That's Central Banking 101. To do anything else would have been a tragic error.

Martin provides a useful guide to the few black marks on the Greenspan record. In the mid-1980s, his firm, Townsend-Greenspan, provided a clean bill of health for Charles Keating's Lincoln Savings and Loan. A few years later, the chairman of the Fed would serve on the board of Resolution Trust Corp., the company charged with cleaning up the thrift's mess. It was an embarrassing conflict of interest.

His record as an economic forecaster is dismal. He ranked dead last among his consultancy peers. His most famous stock market comment ("How do we know when irrational exuberance has unduly escalated asset values?") was uttered four years and 4,000 Dow Jones Industrial Average points ago.

Greenspan was late to recognize the impact of the New Economy and the upward shift in productivity rates that has enabled the rapid growth of the past half decade. He was late to recognize that unemployment could fall sharply lower without generating inflation.

Despite Greenspan's notoriety, there have only been a handful of books analyzing his career. Steven K. Beckner's Back From the Brink provides a mind-numbing recitation of decision-making in the first half of his tenure at the Fed. The Greenspan Effect, a recently published review of his speeches and writings by David B, Sicilia and Jeffrey L. Cruiksbank, provides a useful compilation of his thinking.

Martin's book can now be added to the list as a popular introduction, but an authoratative evaluation of the Greenspan Fed remains to be written.

MERRILL GOOZNER is a journalism professor at New York University.