Oracle at the Fed.

Greenspan
The Man behind Money
Justin Martin
Perseus Publishing, $28, 284 pp.

Maestro
Greenspan's Fed and the American Boom
Bob Woodward
Simon & Schuster, $25, 270 pp.

On the cover of their April 21 issue, the editors of The Economist featured a ripped, buff, Baywatchesque Alan Greenspan plunging through knee-deep seawater in a bathing suit and tank top, with a life buoy in hand and a whistle dangling around his neck. The cover line--as if we didn't get it--read "Greenspan to the rescue."

Rescues have been a matter of course for Greenspan during his nearly fourteen years at the helm of the Federal Reserve. The October 1987 Wall Street crash hit a scant two months after his appointment to the Fed. During the 1990s, Mexico, Asia, Russia, and Brazil all suffered major financial crises that threatened the United States. And in late 1998, the near collapse of Long-Term Capital Management, a major U.S. hedge fund, endangered the entire U.S. financial system. By contrast, the current slowdown in the U.S. economy might rank as a bit of a yawner. Yet, as in the previous cases, Greenspan remains on patrol, slashing short-term interest rates again last month for the sixth time this year, seeking to keep the record 124-month expansion--and his legacy--afloat.

Greenspan's role in guiding the U.S. economy has transformed the chairman into the rarest of creatures: the celebrity economist, his every enigmatic statement endlessly parsed by a Greenspan-obsessed press. Now, as if to certify the chairman's icon status, these two biographies promise insight into the man lurking behind the retro eyewear and the tortured econspeak. Painstakingly researched and telling a story that is spread over the course of Greenspan's life, Justin Martin's Greenspan offers a more comprehensive account than Bob Woodward's Maestro, which dwells mainly on Greenspan's years with the Fed. These works portray an aloof, reserved man driven by free-market ideology but perhaps even more by a keen eye for political advancement and self-preservation.

According to Martin, a former staff writer for Fortune, Greenspan's early years in Depression-era New York gave few inklings of the path his life would take. Although he showed a knack for numbers early on, Greenspan's first love was music. He played the clarinet in his high school orchestra and, after a year at Julliard, in 1944 the eighteen-year-old Greenspan joined a swing band, earning $62 a week playing gigs from the Catskills to New Orleans. Hardly a likely career track for the man who would be Fed chairman.

Yet economics held early sway with Greenspan. "During set breaks," Martin writes, "he started reading treatises on economics borrowed from the public library. The topic gripped him." The decision to embrace economics full-time was vintage Greenspan, the product of a clear-eyed, cost-benefit analysis. "I was a pretty good amateur musician," Greenspan recalled years later, "but I was average as a professional....So I decided that, if that was as far as I could go, I was in the wrong profession."

At New York University and Columbia, Greenspan honed his economics skills and earned a reputation as a tireless data hound. Columbia professor Arthur Burns instilled in Greenspan a deep distrust of government intervention in economic affairs, as did novelist and free-market proselytizer Ayn Rand, whom Greenspan first met in his late twenties. Writing for Rand's The Objectivist newsletter in the 1960s, Greenspan condemned consumer-protection and antitrust laws and even questioned his future employer's independence, decrying the Fed as "government sponsored, controlled, and supported."

After several years running a successful economic consulting firm in New York, Greenspan put his free-market thinking to work for the government. At the prodding of Burns, Greenspan joined Richard Nixon's 1968 presidential campaign as a domestic-policy advisor and, six years later, he accepted the chairmanship of the president's Council of Economic Advisors (CEA), being sworn in just hours before Nixon's resignation. During a time of high inflation and unemployment, the neophyte chairman soon revealed his political naivete. At a conference examining the impact of inflation on income security, Greenspan defended the fledgling Ford administration against charges that its policies hurt the poor. "If you really wanted to examine who percentagewise is hurt the most in their incomes," Greenspan argued, "it is the Wall Street brokers. I mean their incomes have gone down the most." The public outcry was as fierce as it was predictable, and Greenspan later apologized for his remarks before Congress. "He'd put his worst foot forward," Martin explains, "the bionic accountant, numbers-over-emotions aspect of his personality." It was a lesson Greenspan would not forget.

Yet Greenspan also displayed some shrewd politicking at the CEA. Running counter to institutional tradition, whereby the top three CEA economists were essentially equals who divided up the plum duties, Greenspan "jealously guarded the most attractive and high-visibility assignments" and quietly made himself personally indispensable to Ford. This practice soon bred resentment among Greenspan's high-level staffers, some of whom resigned. Greenspan's tendency to put himself before his institution would reemerge in the years to come.

In 1981-83, Greenspan gained prominence when he successfully chaired a bipartisan blue-ribbon commission that provided recommendations on how to forestall a crisis in the Social Security system. This performance, along with his strong Republican ties and his well-known mastery of obscure economic data, made him an easy choice to replace Paul Volcker as Fed chairman in August 1987.

Bob Woodward's Maestro picks up the story here, recounting the politics behind the Greenspan Fed. Predictably, Woodward laces the narrative with an intensely Beltway sensibility, deploying A-list dinner-party scenes and dropping curse words in high places to establish the book's insider bona fides. However, its D.C. cliches aside, Maestro effectively demonstrates Greenspan's ability to overshadow an institution with the force of his personality once again--and lead the media astray in the process.

As chair of the Federal Open Market Committee (FOMC)--the group of high-ranking officials in charge of setting interest-rate policy--Greenspan frequently invoked the need for the committee to appear unified before the financial markets. Consensus, he argued, would ensure the credibility and effectiveness of the group's policy decisions. He also reminded FOMC members of their awesome responsibility: "If it ever gets to the point where this committee is either in disarray or perceived to be in disarray, there is no other institution in this government that can substitute for us."

In practice, however, Greenspan's insistence on agreement meant simply that everyone had better agree with the chairman. Over time, few questioned his authority. The occasional independent-minded Fed officials who dared challenge Greenspan--such as Clinton appointee and Princeton luminary Alan Blinder, who in the mid-1990s had the audacity to question Greenspan's rate hikes--found themselves frozen out of the policy-making process. Much like Greenspan's CEA colleagues years before, a frustrated Blinder soon left the Fed.

His control firmly established, Greenspan became synonymous with the Federal Reserve and, at the same time, the undisputed symbol of the U.S. economic boom of the 1990s. This conflating of the man, the institution, and the economy has produced what Martin and Woodward both call "the cult" of Alan Greenspan. Indeed, the political and media obsession with Greenspan makes the notion of a different chairman appear ridiculous.

The media focus is particularly ironic because Greenspan--long past his pity-the-poor-stockbroker gaffe--has become a master of misdirection. His famous "irrational exuberance" speech of 1996, in which he overtly (and unsuccessfully) tried to talk down the buoyant stock market, proved the exception rather than the rule. More often, Woodward explains, Greenspan practices what he calls "constructive ambiguity." For instance, after a June 1995 press conference on the state of the economy, news interpretations diverged wildly. "Greenspan Sees Chance of Recession" deduced the New York Times. "Recession Is Unlikely, Greenspan Concludes," declared the Washington Post. Greenspan reveled in the confusion. Indeed, as he once told Congress, "I know you believe you understand what you think I said, but I am not sure you realize that what you heard is not what I meant."

The notion of any other public servant deliberately leading Congress, the media, and the public astray would seem anathema to U.S. democratic sensibilities, yet Greenspan's reputation and power are such that many politicians and reporters consider his obfuscations normal, charming, even amusing.

The cult of Greenspan raises obvious questions that neither author addresses satisfactorily: Is there a danger in depending on Greenspan too much? What happens after Greenspan? When a critical institution like the Federal Reserve is so identified with a single individual, how might financial markets react to a different hand at the helm, particularly when the inevitable economic crisis hits our shores? Will irrational gloom take hold?

In this narrow sense, perhaps the current economic downturn is a good thing. By puncturing the mythology of Alan Greenspan and revealing his inability to rush to the rescue every time, the prospect of a successor--inevitable as it is daunting--may not seem so frightening. There will be life after Greenspan.

Carlos Lozada is the associate editor of Foreign Policy magazine in Washington, D.C.