Rebellion in the ranks. Greenspan's streak of unanimous FOMC decisions has come to an end.

When the Federal Open Market Committee met on May 15, members were anticipating a lively discussion. As the seventeen central bankers settled around the mahogany table in the Fed's conference room, they were faced with a tough decision: Should they keep slashing interest rates to squeeze more growth out of the lackluster U.S. economy or hold back to see if the interest rate medicine they had already injected would kick in?

Fifteen of the officials, including chairman Alan Greenspan, worded that the economy would slide into recession. They were ready for another 50-basis-point cut. Their rationale: Despite the Fed's best efforts to slash short-term interest rates--from 6.5 percent to 4.5 percent since the beginning of the year--the economy was showing few tangible signs of recovery. Consumers were still rattled, growth in Europe was slowing, and high energy prices were acting as a drag on an economy that was already fragile. The economy needed another jolt, the bankers said.

Although FOMC members shared deep concern that the economy wasn't responding to the most aggressive interest rate cutting regime in Fed history, that was not the most unusual aspect of the meeting. What stood out this time was a lack of unanimity. For the first time in two years, not every member of the FOMC fell in line behind the Chairman. Greenspan, who had led the charge to raise rates to slow a red-hot economy last year, was now viewed by some inflationphobes in the room as too dovish.

Greenspan again encountered opposition when the FOMC met on June 27. This time, Hoenig went along with a 25-basis-point cut in the federal funds rate, but St. Louis Federal Reserve Bank President William Poole cast a solitary "no" vote. His concern echoed Hoenig's argument in May: The Fed may have already eased too much.

The minutes from the June meeting didn't say why Thomas Hoenig, the mild-mannered inflation hawk who heads the Kansas City Fed, voted with Greenspan after having said just two months earlier that he was concerned that the Fed was in danger of overshooting the mark. In his district, there were still some areas with 2 percent unemployment. Hoenig wanted to wait and see whether the interest rate cuts the Fed had already made would do the trick. He said as much before the coffee break at the May meeting.

"When you move from a higher rate the risk of overshooting is relatively small. But as you move towards 4 percent, then the uncertainty increases," he told TIE, reprising the case he made before the FOMC, as each of the bank presidents presented his or her economic outlook in turn. "There is less of a margin of error. That's when you should be shortening strides and that's the point I was making."

After the coffee break, when the group reconvened to decide whether to lower rates further, it was clear that Hoenig was not alone in finding it hard to stomach another half point reduction in rates. Other members piped up. Governor Laurence H. Meyer, one of the nation's top forecasters, said he was concerned that the Fed hadn't given the interest rate cuts time enough to work. Another cut could potentially overheat the economy. Governor Edward Gramlich, another long-time inflation hawk from Michigan, echoed that sentiment.

While the May 15 minutes papered over the differences in opinion, they could not hide the fact that Greenspan had encountered his first dissenter since 1999. The minutes dutifully reported that Hoenig voted against the chairman's recommendation to cut rates another one-half point. (The minutes did not reveal, however, that at least two other FOMC members were contemplating breaking with Greenspan). The long-standing institutional pressure to close ranks had finally found its breaking point.

It is clear that as difficult as the last five years have been for the Fed to navigate in this New Economy, the job is about to get even tougher. Greenspan, a New Economy guru of sorts, is having to convince colleagues on the FOMC that in the current low inflation environment, they have less to fear from overshooting in lowering interest rates than from underestimating the persistent weakness of the U.S. economy.

Insiders say much of Greenspan's quiet consensus building occurs before the central bankers ever convene in the Fed's conference room. The chairman was hardly surprised by Meyer and Gramlich's reticence to lower rates another half point. The three had discussed the issue in the weeks leading up to the meeting in casual office conversations.

"The actual meeting presents a certain vulnerability for the chairman," says one Fed insider. "He can't know what the bank president are thinking but he works in the same building with the governors and there are lots of interesting dynamics that lead up to the actual meeting. He has a pretty good idea what we are thinking before we ever start the meeting."

Typically, minutes from Federal Reserve meetings only hint at dissention among members in their secret sessions. The minutes from the March 20 FOMC meeting noted that "most" members agreed with Greenspan's recommended half-point interest rate cut. "A few" insisted that the economy was weak enough to warrant a three-quarters point move. Even so, when the meeting was over, the final vote was 10-0 to cut rates 50 basis points.

"Alan has been right so often now that some of us trust his judgment more than our own," says one FOMC member. "He's the guy who gets new meaning out of old numbers so when we're unsure we decide to trust him and vote with him. His track record is hard to argue with."

In his early years as chairman, Greenspan had more convincing to do. At least one colleague routinely voted against his rate recommendations. In 1988, a year after Greenspan took the helm at the Fed, members of the FOMC objected in six of the Fed's eight regular meetings. Greenspan even had to suffer a rare 8-3 vote. A year later, at least one member dissented in every meeting. Greenspan got a pair of no votes three times. The committee was divided about where the economy was headed as much as the members were uncertain about the ability of their new leader.

"Dissents don't really tell you a whole lot," says one longtime FOMC member. "The individual who decided to dissent really thought his position was sufficiently important to be on the record feeling that way."

Three Fed insiders who did not want to be further identified say they believe it is quite possible that dissents would crop up more often in the coming months. "It would be surprising if everyone were not thinking at some stage we clearly are going to reach the end of this process and end the easing period and shift in the opposite direction," says one official. "That grows in the mind of every member of the committee. In some cases, stomach linings release gas faster than others, and that's what creates the differences in opinion."

Although members are always free to dissent, the Fed prefers to send messages to the financial markets with one voice and keep internal disagreements under wraps. Indeed, Greenspan structures the Fed meetings to promote consensus. He waits to speak and make his rate recommendation, for example, until after all his colleagues have gone first.

That's what he did at the May 15 meeting. After Fed secretary Don Kohn laid out the policy options and members discussed their districts, Greenspan made his case. The economy was still weaker than anticipated, there were some troubling developments in markets overseas, and energy prices were sapping what little vitality the economy had. There needed to be another half point move, he concluded. His argument won over all the members on the fence other than Hoenig.

If members are badly divided, Greenspan has other tools at his disposal to bring them together. He has offered to tinker with the language in the Fed's public statement, for example, or he has promised to revisit a decision and not make a rate move before the next scheduled meeting of the FOMC.

All the Fed insiders agree, however, that dissents tend to crop up at the beginning or end of a series of rate moves. That's why, as the Fed comes to the close of the latest aggressive series of cuts, division is likely to grow. The next move becomes murkier, and those who feel strongly enough that the Fed is on the verge of a monetary policy blunder are emboldened to make their objections formal.

The debate within the Fed during the summer, according to one insider, was over how quickly the Fed could reverse course if it overshoots. The Greenspan camp argues that if the central bank finds it cut interest rates too deeply, it has time to tighten policy before inflation becomes a problem. But the Hoenig-Meyer-Gramlich-Poole bloc worries that with unemployment still below 5 percent by late summer, the Fed's zealous rate-cutting will overstimulate the economy and let inflation out of the bottle. "This is a tough call for all of us," one FOMC member said before the August 21 FOMC meeting. "A lot of the earlier rate cuts were easy to make. Now, we're all are struggling over the right thing to do."

Hoenig concedes that whenever a member decides to dissent, "of course it gives you pause. People express their views; there is a wider range in interpretation of the data. That shouldn't take away from Alan Greenspan. It just reflects the difficulties of the time."

Without unmistakable signs of an economic recovery, Greenspan and his FOMC colleagues are sure to experience just how difficult the times are.

Dina Temple-Raston covers the Federal Reserve for USA Today.