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To: Paul Fiondella who wrote (21255)	3/19/1998 4:58:00 PM
From: dwight vickers	Respond to of 42771

(Off Topic) It's a fine line he walks, no doubt. By staying loose the eventual downside becomes bigger and bigger. The correction to all of the non economic investments made in this elongated cycle will be massive. The other liquidity that Greenspan controls is day to day Fed operations, draining or supplying reserves to the banking system. This is an area he could have used a long time ago to slow without having to make an obvious move like raising interest rates. It's not as quick, and not as sure. But it's a tried and true weapon. "Excess reserves" have been at extremely high levels for years. I am truly baffled as to why this has been allowed. Before the historic inflation of the 70's and 80's the Fed still used the tools at their disposal to manage the economy. Even if they weren't specifically worried about inflation as Greenspan worried about it until recently. Typically they took a recession early in the Presidential term so that the party in power would look good when elections were due. He screwed that up (on purpose?) for Bush in 1992, and as Ford's economic advisor in 1976. He sure has wised up since 1992, hasn't he? Dwight