Liberals still fuming over Al Gore's loss argued that the nation's central banker only slashed rates to make the economy glisten for fellow Republican George W. Bush. Yes, layoffs have begun to extend outside the dot-com sector into manufacturing and a recession may not be far behind, but, they argue, Greenspan has never made a habit of engineering economic shocks. Caution has been the mantra of his 17-year term. The half-a-point cut -- a break from recent quarter-point tradition -- was nothing but political, Democrats say, an action inspired by the GOP not the GNP.

Are the criticisms valid? Bob Woodward, author of 10 books on Washington including "All the President's Men" and more recently, "Maestro: Greenspan's Fed and the American Boom," agreed to discuss the Fed's recent actions, the criticism enveloping Greenspan -- and the economy's ultimate future.

Was Greenspan's half-point rate cut on Jan. 3 a gift to the incoming Bush administration -- an attempt to prop up the economy for the new president?

That just doesn't make sense. If you've read through the book or read about the period of '94-'95 when they raised rates, then started lowering them, you'll see that [the recent interest rate cut] fits that model. Greenspan's trying to execute the second soft landing. A while ago, it was clear to me -- and I said this publicly a number of times -- that the Fed was soon going to start lowering rates. The timing and degree -- the half-point drop -- have to do with the numbers they have. I think it's basically an economic decision, not a political one. Greenspan is certainly aware of politics and apparently wanted to avoid [cutting rates] early in the Bush administration. But you can interpret it either way: It could help Bush advocate his tax cut plan, or it could hurt him.

The interest-rate cut also raised eyebrows because it came between meetings of the Federal Open Markets Committee, the seven-member board that Greenspan oversees. What's the significance of this, of Greenspan's power to move policy between meetings, without committee votes?

Well, they normally give him the right to move rates at each regular meeting. It's ambiguous, that power. In this case, I understand, he held a telephone conference. Actually, there's one report that he held a vote over the phone of the committee members. There are cases, I report in the book, where he did that to make sure everyone was on board, then made the cut himself. But he dominates the institution in a way that everyone agrees on. It's not with a heavy hand. He listens, he incorporates people's views. It's consensus leadership. But some consensus counts more than others. He decides.

There's an interesting subtext, though, with Bush. Greenspan and Bush's circle of advisors -- particularly Dick Cheney and Donald Rumsfeld -- are old friends, as you point out in your book. Yet George Sr. blamed Greenspan for his loss to Bill Clinton in '92. How do you think this conflict will play out?

Well, it's the classic question of does the enemy of your father -- allegedly Greenspan -- become your enemy or does he become your friend? Enemy is too strong a word, but father Bush has been public and direct in blaming Greenspan for his '92 defeat -- which I don't think is correct. During that period, Greenspan and the Fed had to worry about inflation and if you lower the rates too fast, too much, you can still get inflation. That's the problem right now; the Fed is still basically an inflation-fighting institution. If they didn't have to worry about inflation, they just would lower rates more quickly and dramatically.

So, it's my sense that with the way Bush embraced Greenspan -- talking about the high regard he held for Greenspan's skills -- he clearly was reaching for the Clinton model of "let's work together." And Greenspan realizes that it's to everyone's advantage to have a good working relationship [with the White House], to the point which, as I say in the book, he felt that he and [Robert E.] Rubin -- Clinton's Treasury secretary -- felt like they were working for the same firm.

You mentioned that Greenspan has been trying to engineer a "soft landing." Here in Silicon Valley, the land of layoffs, few see the dot-com downturn as anything but hard and bumpy. Are dot-commers correct to blame Greenspan for their woes?

They may turn out to be correct. But if you go back to '95, which is the equivalent period in terms of the rate increases, there was immense talk of recession but the economy pulled out. So you don't know. It may be that they raised rates too much and kept them high for too long. The model, the conviction that Greenspan has, is that you've got to turn the screw an extra time and really make sure that you slow down the economy. It is a tricky calculation and the economy may have shifted very quickly. People keep saying, "In December [the Fed] said they didn't have to raise rates, then they did in January." But that's the way it always is. There is a moment when they shift. I don't find that unusual. And it may work, it may not. The conditions now are different than in '95.

In what way?

The stock market is going down dramatically, or at least in the technology sector. And the big question is, Will the productivity growth continue? It's been very high in recent years, and that's the X factor in keeping the economy strong. So maybe the paperback version of my book will have to be entitled "Maestro Emeritus" or "Former Maestro."

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