As Fed chairman, every time I expressed a view, I added or subtracted 10 basis points from the credit market. That was not helpful. But I nonetheless had to testify before Congress. On questions that were too market-sensitive to answer, “no comment” was indeed an answer. And so you construct what we used to call Fed-speak. I would hypothetically think of a little plate in front of my eyes, which was the Washington Post, the following morning’s headline, and I would catch myself in the middle of a sentence. Then, instead of just stopping, I would continue on resolving the sentence in some obscure way which made it incomprehensible. But nobody was quite sure I wasn’t saying something profound when I wasn’t. And that became the so-called Fed-speak which I became an expert on over the years. It’s a self-protection mechanism … when you’re in an environment where people are shooting questions at you, and you’ve got to be very careful about the nuances of what you’re going to say and what you don’t say.
That's from this interview of Alan Greenspan (via Newmark's Door). Mike Podgursky, the chair of the Economics Department at Mizzou when I was there, used to say he'd like to hear Greenspan's answers to students asking him what's on the exam.
Update: then there's this on his view about how to get rid of the stagnation in the long-term asset (i.e. real estate) markets.
What do you think of this administration’s policies to address this?
Well, it’s not the present administration, it’s the current view of most policy-oriented economists. And here, regrettably, I am in the minority. The notion that if there is an economic problem, the government is obligated to address it, necessarily creates uncertainty about the future. And there’s hard research that shows such activism is responsible in part for the very heavy discounting of earnings on longer-lived business investments, and by households that had dramatically shifted from owner occupancy to short-lived rentals in the face of the uncertainty of the direction of home prices. We need to replace such activism with a policy that allows the markets to correct their own imbalances. Remember the Resolution Trust Corporation in the early ’90s? I was on the oversight board of the RTC. It got stuck with the job of liquidating more than 700 failed savings and loans. Some of the stuff that the RTC wound up with was perfectly liquid and saleable. But a big chunk was uncompleted eight-hole golf courses, half-built office towers, and vacant malls. Nobody wanted it. We all sat around and said, “This stuff is deteriorating very rapidly, and if we don’t get rid of it, the taxpayers are going to take a huge hit.” I mean, the numbers were very, very large. Somebody suggested, “Let’s package it and sell it.” And we did. Needless to say, the bids were less than 50 percent of the original cost. Congress was outraged. We were giving away taxpayer-owned assets to greedy vulture funds.
They wanted in on that action.
Indeed, that’s what happened. Hitting whatever bids were available in this stagnant market defined the low point on prices. Then something happened.
Real estate prices went up again?
Yes. Investors cleared out our illiquid inventory in a matter of months. The final cost to the taxpayers for the savings and loan crisis amounted to $87 billion, a fraction of the original estimate. Allowing the markets to liquidate worked.
You didn’t support the stimulus?
No, I did not. It was unnecessary. I argue in a book I am writing that the stock market recovery in early 2009 created an equity stimulus that, as best as I can remember, had a far larger impact on economic activity than [the stimulus act] without incurring increased public debt.