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2HRS2GO: Greenspan marches to his own drummer

COMMENTARY--Alan Greenspan couldn't have sent a clearer message.

Not about the economy. There is no new information to be gleaned there; everyone already knows it's a moving at a more arthritic pace.

But over the past few weeks, Greenspan seems to be making a point as chairman of the Federal Reserve: Wall Street does not dictate fiscal policy.

Investors have known that too, but they continued to hope they could bully the Federal Reserve. You could argue that's exactly what happened today, with this year's second between-meetings rate cut by the Federal Open Market Committee.

Yet if the Fed were truly susceptible to the Street's pressure, today's action wouldn't have happened at all, because there would have been a deeper cut a month ago at the FOMC's last meeting. You might remember this sort of headline, written March 20: Techs fall on rate-cut disappointment.

Investors, fund managers and traders at the time were screaming for cut of 75 points in the federal funds rate. They drove stocks lower when the FOMC produced a cut of "only" 50 points.

Certainly the Fed could have justified a deeper rate cut at the time. Consider Greenspan's rationale for today's reduction:

"Capital investment has continued to soften, and the persistent erosion in current and expected profitability, in combination with rising uncertainty about the business outlook, seems poised to dampen capital spending going forward. This potential restraint, together with the possible effects of earlier reductions in equity wealth on consumption and the risk of slower growth abroad, threatens to keep the pace of economic activity unacceptably weak."

Despite what the Fed says in its news release, this is not "information that has become available since its March meeting." Greenspan was just as aware of corporate earnings worries then as he is now. The somewhat bleak results Intel (Nasdaq: INTC) posted yesterday were not unexpected, and few people can claim to be surprised that Cisco Systems (Nasdaq: CSCO) or Texas Instruments (NYSE: TXN) reported more bad news.

Greenspan sees the same data available to everyone else, and more. He is not deluded.

However, he is careful and measured in his words and deeds, and he is strong-willed. He won't act until he is ready, regardless of when Wall Street expects something.

In fact, he seems to be acting after the market reached its nadir. The Nasdaq has been rising for a full week now and seems likely to have added further gains without any input from Greenspan.

Given Wall Street's propensity to overreact to everything, Greenspan may have actually helped to make the market a little less steady than it would have been had he said nothing. What might have been a gradual, sustainable climb over a course of days has now been compressed into the span of a single Wednesday, as today's investors reach a state of ecstasy over lower interest rates.

But Greenspan has again demonstrated that he doesn't dance to the rhythms of Wall Street. He listens to a broader musical theme. 22GO

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