Greenspan takes center stage in 'Age of Turbulence'

Alan Greenspan has spent a lifetime writing speeches and papers on the economy.

But when it came time to write about his own life, the former Federal Reserve chairman says he hit a wall.

"I'm an introvert," Greenspan, 81, says, sitting in his expansive office in downtown Washington with a view of the Washington Monument Friday afternoon.

"I'm always an objective observer, standing off the stage, examining the play going on, but never on the stage," he says. "But they wanted me on the stage, which meant writing in the first person. And that was a struggle."

Greenspan plays the lead role in his book, The Age of Turbulence, out Monday, and gives readers a look into a man everyone knows but few know a lot about. One million copies of the book have been made in the initial printing.

Although Greenspan also delves into a variety of economic topics, it is the personal part that is likely to be the most interesting, even for those who have followed the former Fed chief for decades.

He discusses how his parents' divorce "left a big hole" in his life, even though he remained in touch with his dad, Herbert, who was a broker on Wall Street. Later, of his divorce to his first wife, Joan Mitchell, Greenspan says, "I was the main problem," arguing he married a good woman for the wrong reasons.

Greenspan describes how his mathematical abilities shone through at a young age. His mom, Rose Goldsmith, used to show off to relatives how he could do addition and multiplication in his head, a likely uncomfortable feat for someone who as a boy was "more inclined to sit in the corner." As an avid baseball fan, he developed his own technique of keeping baseball box scores during the 1936 World Series.

"To this day, I can recite the lineup of Yankees starting players, complete with their positions and batting averages, for that World Series," he says.

Such skills helped him succeed in later years, starting in his first job as an economist making $45 a week analyzing obscure, industrial data, later building up a successful consulting firm and then joining the government.

After leading the Fed for 18½ years, Greenspan today runs his own consulting firm, Greenspan Associates. He continues to make speeches for six-figure fees, mainly at private gatherings. But occasionally he has shaken up stock markets when his comments have hit the press, drawing criticism from those who say the guy just doesn't know how to retire.

That criticism will likely grow louder, with Greenspan releasing a book the day before the Fed meets to discuss interest rates. (He says he didn't select the date and just found out when the Fed was meeting a little over a month ago.)

"I'm an economist," Greenspan says, charts filling up his computer screen and papers piled in nearly every corner. As he prepares for a photographer to take pictures of him sitting at his desk, Greenspan announces, "This is my filing system" and throws a heap of newspapers onto the floor.

"It's what I love to do. It's what I've been doing since my early 20s," he says. "I've changed employers, but I've never changed what I do every day. And I have no intention of doing that."

Greenspan has been in defensive mode these days. Several prominent economists, such as Stanford University professor John Taylor and UCLA professor Edward Leamer, have said the Fed under Greenspan kept interest rates too low for too long, fueling the housing boom that has gone bust.

"Sometimes I get criticized, and I deserve to be criticized, and that's part of the game," Greenspan says. "But this one, I'm innocent."

Greenspan argues that the Fed mainly has influence over short-term interest rates, which affect adjustable-rate mortgages, a small portion of the overall mortgage market. Long-term interest rates, which influence fixed mortgage pricing, are somewhat beyond the Fed's control and became more so earlier this decade.

"We tried to push them up in 2004, and we failed," he says. "What we found was that the global forces of disinflation were far too powerful for even the Federal Reserve. We tried again in 2005, and we failed."

Greenspan notes that if the housing bubble was the Federal Reserve's fault, why were similar such bubbles — many of them worse than what was seen in the USA — created around the globe?

Greenspan argues that the growth of the subprime mortgage market has helped expand homeownership in the USA, a worthy endeavor despite the downside that has been seen in recent months as people who were less creditworthy have struggled to make escalating payments on adjustable-rate mortgages.

"Subprime is risky," he says. "But it's so urgent that we get broad ownership, especially of homes, that from a societal point of view and from an economist's point of view, there's no question in my mind … that it is worth it."

Regarding a speech he once gave arguing adjustable-rate mortgages made more economic sense than fixed-rate mortgages for some, Greenspan says, "I'd reproduce that speech word-for-word today."

Memoir penned in the bathtub

Greenspan started writing The Age of Turbulence a day after he retired from the Fed in January 2006. He has taken little time off.

"I was trying to hold the whole book in my head at the same time, and I knew if I took two weeks off it would just spill away and I'd have to pick up again," he says in the interview.

He wrote the 531-page book as he did his speeches at the Fed — in longhand and mainly while sitting in the bathtub, which he does every day since starting the practice after a back injury in the 1960s. He says the invention of a pen that can write in water has made it easier for his assistants to make out the sometimes soggy papers.

The book is in two parts. The first is autobiographical, starting on Sept. 11, 2001, and then winding back to his childhood and eventually going into detail about his time at the Fed.

He includes details of his relationship with wife Andrea Mitchell. After their first date, he invited her back to his apartment to read an economics paper he had written. They've been together ever since.

"I'm not threatened by a powerful woman; in fact, I'm now married to one," Greenspan says, when discussing TV newswoman Barbara Walters, whom he dated after meeting in 1975. "The most boring activity I could imagine was going out with a vacuous date — something I learned the hard way over my years as a bachelor."

But the book mainly focuses on Greenspan and his career. In the second half, Greenspan covers a number of his pet topics, many of them familiar to those who have been following the former chairman's speeches and testimony. He argues U.S. primary and secondary education is slipping and must be reformed quickly to reduce income disparities between the skilled and unskilled, says trade protectionism can only hurt the economy and advocates looser immigration policies to provide more skilled workers.

He also frets about probably his biggest concern: the retirement of the baby boomers and the impending fiscal problems caused by the draws on Social Security and Medicare. He considers it an urgent problem that needs to be addressed soon.

Criticism for President Bush

It is regarding fiscal issues that Greenspan comes out swinging.

The former Fed chairman sharply criticizes President Bush for not vetoing bloated spending bills and for continuing to focus on issues such as adding prescription drug benefits to Medicare even though the budget surplus of just a few years ago had disappeared and deficits were mounting. "In the revised world of growing deficits, the goals were no longer entirely appropriate," Greenspan says. "He continued to pursue his presidential campaign promises nonetheless."

Greenspan, a libertarian Republican, as he calls himself, was also disappointed that his former colleagues from the Ford administration who were working for Bush, including Vice President Cheney, didn't show greater fiscal discipline.

"People's ideas — and sometimes their ideals — change over the years," Greenspan writes. "I was a different person than I had been when first exposed to the glitter of the White House a quarter of a century before. So were my old friends: not in personality or character, but in opinions about how the world works and, therefore, what is important."

The Bush administration has often attributed the deficits to the impact of the 2001 recession, Sept. 11, the war on terror and corporate scandals. "We are not going to apologize for spending that was required for national security and fighting the war on terror," White House spokesman Tony Fratto says. "We respect the work that Chairman Greenspan did," he says. "We always respect his opinion. We share his views on limiting fiscal deficits."

Greenspan also doesn't spare Republicans in Congress, who he says were "feeding at the trough," passing expensive pet projects for their home districts. For this, he says, they "deserved to lose" control of Congress to the Democrats in 2006. "The Republicans in Congress lost their way," he says. "They swapped principle for power. They ended up with neither."

Once the media blitz from the book is over, Greenspan says, he doesn't have plans to take a vacation or any kind of break. Instead, he says he has too much work to do, putting together computer programs to run econometric analysis.

But he does plan to avoid the spotlight that the introvert in him so eagerly avoids, he says. "I hope to go back and hide for a little while," he says.