Greenspan fiddled while the economy burned

Meanwhile, what is to be done regarding the Fed? Reform is long overdue. Here are some suggestions:

* First, Congress should not be so deferential to the Federal Reserve Board and its chairman. They are apointees; they were not elected. As the watchdogs of our welfare, elected officials should be more aggressive in holding the Fed accountable for its job performance. If the Fed is management, Congress is the board of directors and American citizens are the shareholders. In spite of the devastation to the economy and working Americans, hardly a voice has been raised in Congress to question (and criticize) what happened and why.

* The Fed and its chairman should communicate in plain English. Greenspan practices "constructive ambiguity." The European Central Bank, on the other hand, holds a press conference after its rate decisions to explain its action.

* The term of office of the Federal Reserve Chairman should be shortened. When one person holds an office for so long with so little accountability, it is a recipe for trouble. Americans learned this with J. Edgar Hoover in the FBI. A long-term chairman becomes so powerful that he always gets his way. Just about all of the FOMC votes are unanimous, or nearly so. In the words of Gen. George S. Patton, "When everyone is thinking the same, no one is thinking very much."

* There should be a mandatory retirement age. Greenspan will be 80 if he finishes out his latest four-year term. Can he slay in touch with the developments in the economy? Has he? Does he care? The chairmen of the Federal Reserve Banks, on the other hand, must retire at 65.

* The structure of the Fed should be reformed. When the current Federal Reserve System was established in 1913, it was reflective of the economy then. While there are two branches in Missouri, there is just one west of Kansas City. A Federal Reserve Board that is more reflective of the real economy of the U.S. could give a more balanced approach to economic policy. Keep in mind that, if California stood alone as a separate economy, it would be the fifth largest in the world.

The economy is not just statistics. It represents, in very real terms, lives and fortunes of millions of individuals and families. It is obvious the kind of damage inept policies can cause. If the legislative and executive branches of government really are interested in avoiding the mistakes of the past, these policy recommendations would be a good place to start.

William D. Rutherford is president of Rutherford Investment Management LLC and author of Who Shot Goldilocks? How Alan Greenspan Did In Our Jobs, Savings and Retirement Plans.

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