Greenspan Chooses a Successor?

Federal Reserve chairman Alan Greenspan, who retires in January, is the master of monetary policy and probably the greatest Fed boss ever. But his expertise in the field of personnel leaves a lot to be desired. In 2000, it was Greenspan who helped persuade George W. Bush to hire Paul O'Neill as his treasury secretary. He said O'Neill would be a world-class cabinet member. O'Neill turned out to be an embarrassment. He opposed Bush's economic policy, especially tax cuts. And after he was fired, he cooperated with author Ron Suskind on a book trashing the president, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O'Neill.

Now Greenspan is at it again. He has recommended to the White House that either Roger Ferguson or Donald Kohn, both current Fed board governors, be tapped as his successor as Fed chairman. Both are highly skeptical of Bush's tax cuts, despite the strong economic recovery the cuts have spurred. Both could be expected to continue raising interest rates, in part to punish the president for not raising taxes and failing, in their view, to pay enough attention to the budget deficit. Their likely idea of a tacit deal next year with the White House: You raise taxes, we'll stop boosting rates.

Ferguson is a Democrat appointed to the board by President Clinton. He is a protégé of Clinton's two treasury secretaries, Robert Rubin and Larry Summers. His wife, the newly appointed Democratic commissioner at the Securities and Exchange Commission, is lionized by pro-regulation, liberal staffers on Capitol Hill.

Kohn is a former staffer who has spent his career at the Fed and was elevated to the board by Bush on Greenspan's recommendation. His loyalty to the powerful Fed staff is unstinting, which means he is no fan of Bush fiscal policy. His appointment to replace Greenspan would ensure American monetary policy would be narrowly defined, largely by Fed bureaucrats.

The worst case scenario would be an economic downturn caused by the Fed's "overshooting" in its desire to curb inflation by imposing too many interest rate hikes. This is what befell Bush's father, the first President Bush. Guess who the Fed would blame with Ferguson or Kohn at the helm? Not the Fed itself, but George W. Bush for not raising taxes, and doing so fast enough to address the deficit.

Dear Judy, How's Your Aspen?

Washington insiders were agog last week at the letter written by Vice President Cheney's chief of staff, Lewis "Scooter" Libby, to jailed New York Times reporter Judith Miller, which was said to have figured prominently in her decision finally to agree to testify before the grand jury investigating the leak of CIA agent Valerie Plame's name to the media in the summer of 2003. After the letter was leaked to and subsequently published by the Times, Slate's Mickey Kaus, among others, speculated that Libby might have been sending coded messages to Miller about how she should testify, especially in the letter's concluding lines:

"Dear Judy, . . . You went to jail in the summer. It is fall now. You will have stories to cover--Iraqi elections and suicide bombers, biological threats and the Iranian nuclear program. Out West, where you vacation, the aspens will be turning. They turn in clusters, because their roots connect them. Come back to work--and life."

The Scrapbook's theory, for what it's worth, is that this was just literary flair. Not widely known is the fact that Libby, besides being Cheney's right hand man, is also the author of a highly acclaimed 1996 novel, The Apprentice.

Adding credence to the "literary" explanation is another piece of Miller's prison correspondence, apparently from a little known White House official, one Matt Arnold, obtained last week by The Scrapbook as we were going to press. While we have been unable to vouch for its authenticity, we thought it worth reprinting for the prose alone:

Dear Judy,