Greenspan Addresses Sway Markets and Legislators

If there was one man who wielded the most influence over the American economy, it would be Alan Greenspan. From maneuvering interest rates to curbing inflation, the Fed chairman's job literally spans the movement of the country's green.

His public addresses this week alone have swayed energy markets and legislators alike, as he downplayed the downsides of rising oil prices on Tuesday and argued for limits on mortgage giants Freddie Mac and Fannie Mae on Wednesday. Business reporters covered not only his words, but also the impact they had on markets.

In his talk to a petrochemicals and refiners trade group in Texas on Tuesday, Greenspan worked to calm backlash from the oil "price frenzy," describing it as temporary.

"The Federal Reserve chairman is expected to think big -- that is long-term -- thoughts, and yesterday Alan Greenspan complied," wrote Dan Ackman of Forbes. "His message: Despite the recent turbulence, the energy markets will sort themselves out."

Many stories mentioned Greenspan's forecast that oil prices will goad the industry to turn to better conservation in the short term -- and more innovative, and less expensive, methods of oil production and exploration in the long term.

But a couple reporters pointed out topics Greenspan didn't cover in his talk. "While Greenspan sounded optimistic about the long-term effects, he said nothing about the probable impact of climbing energy prices this year on U.S. economic growth, inflation or Fed interest rate policy -- all subjects of intense interest in financial markets," wrote Nell Henderson, business reporter at The Washington Post.

Edmund L. Andrews, staff writer for The New York Times, agreed that Greenspan remained largely "silent about the potential impact" of the higher prices on the country's economic factors.

He did note, however, that crude oil prices receded by a little more than $2 from its peak Monday to end of day Tuesday, after Greenspan spoke. In fact, the Associated Press logged a slight gain in stock indices.

And despite Greenspan's optimism about oil prices not hurting the overall economy, Washington Times staff writer Patrice Hill found a consumer survey that showed they are "cutting back in other areas, such as eating out, to accommodate higher gas bills."

Interestingly, Greenspan appealed to legislators not to interfere in the energy markets, saying they'd ease themselves through market forces. But in the Freddie Mac and Fannie Mae stories, he appealed to legislators to act -- and act quickly before either's collapse could cripple the housing market.

In testimony to the Senate Banking Committee, Greenspan told "Congress it must curb the rapid growth of Fannie Mae and Freddie Mac to cut the risks the mortgage finance giants pose to the financial system," wrote Kristin Roberts of Reuters.

Reporters discussed that this economic issue could spark a political battle. A Bloomberg story referred to bills calling for stricter regulation of the two government-sponsored mortgage companies that stalled in 2003 and 2004.

Tying the debate to average readers, the Bloomberg story talked to economists who feared that more stringent regulations "might result in higher mortgage interest rates."

But thanks to Greenspan's urging and financial trouble at the two companies, an Associated Press story suggested that "prospects for passage of legislation appear stronger than in previous years."

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism