"My personal preference is strongly for _," Blinder concluded. "...I thought hard about whether I should dissent on this matter, and I did not decide until last night. I finally decided that I won't....I think it is better to show a united Federal Reserve against the criticism that we are surely going to get for this move." Blinder would go along with the rate hike, but he made it clear that he would stand strongly against raising rates again at the next meeting.

"Okay," Greenspan said, right on the tail of Blinder's long speech about his struggle. "I propose that we move _ percent."

All 12 members voted yes.

Blinder had gone with the chairman because he didn't want to use the power of his dissent on what could be seen as a tactical dispute. The practical difference between _ percent and _ percent, in terms of measurable effects on the economy, was quite small. Blinder's chief concern was where they might be heading in the months to come.

He also knew that there was a tradition at the Fed that members go along with the chairman unless they are really uncomfortable, terribly uncomfortable. This is especially true of the vice chairman. Nobody at the Fed, as far as Blinder knew, could remember the last time a vice chairman had dissented from the will of the chairman.

Blinder also realized that if he shot his cannonball now, it would be wasted -- because he wasn't going to change the decision. He would have fallen on his sword for no reason.

Blinder came from an academic environment, where he was used to following his conscience. It had become clear to him that voting solely on the basis of his convictions and economic conclusions wouldn't work at the Fed.


The year 1995 was no better for Blinder, and he and his wife Madeline flew to Acapulco, Mexico after Christmas to vacation on the beach, so he could stare at the water and decide whether he should seek reappointment as vice chairman when his term expired in early 1996. It was a hard decision. After less than two years at the Fed, he was profoundly frustrated.

Blinder believed he had figured out what was so disconcerting. Greenspan didn't allow any risk. If there was a 2 percent or a 4 percent probability that something might happen -- such as Blinder succeeding him or Blinder's star rising -- Greenspan worked to bring the probability down to zero. Most people would tolerate low chances. Greenspan wanted to stomp out the slightest probability. That's why Greenspan had stuck the knife in him, Blinder believed, in so many ways and so skillfully. And there were no fingerprints.

Blinder decided he should leave. He wanted to be a lame duck for as short a time as possible, so he cut it tight and told the White House only two weeks before the expiration of his term. As a little piece of revenge, he decided not to tell Greenspan. Blinder figured the chairman could read about his departure in the newspapers. After all, Greenspan had never really told him anything, never really let him in the way Blinder had hoped. He realized it was childish on his part. The news of his departure hit the papers on January 17, 1996.

Greenspan said nothing to Blinder, but he presided at a little going away party for him.

You know, Greenspan said graciously at the ceremony, it seems like you just got here, it's been wonderful to have you.

Ha, ha, Blinder thought as he stood nearby in deep discomfort.

How much, Greenspan continued, he had enjoyed having Blinder as a colleague, how valuable he had been to the FOMC and the board, what a shame he was leaving so soon.

Ha, Blinder thought again. He concluded that Greenspan was not a straight person, not open and direct in the way that Blinder expected of colleagues. He had just wanted to be part of the interest rate game, and Greenspan had not permitted it.

Copyright © 2000 by by Bob Woodward, Simon & Schuster