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Martin Mayer's engaging examination of the much-talked-about but little understood U.S. Federal Reserve begins with the dramatic events of October 1998, a month in which the market closed "lock limit down" for the first time in almost a decade. At the same time, Alan Greenspan, the Fed's chairman, began radically reinventing his agency's role and its influence on the market. Indeed, while most of the rest of the world's countries were diminishing the role of their central banks, Congress was granting new powers and responsibilities to the Fed. Mayer's book--part history, part journalistic report, and all detailed analysis--looks at the significance of those powers, their benefits and risks, and what they mean to the markets. He also devotes chapters to the day-to-day inner workings of the Fed, its influence in international financial matters, and its possible role in coming years. As a prolific author and respected economics scholar, Mayer has been immersed in the financial world for decades and provides both bird's-eye and long-range views of money's complicated maneuverings. Without his excellent storytelling abilities and fluid writing style, this book would be heavy going for anyone who doesn't speak the language of high finance. Though it is most definitely dense (and its structure somewhat erratic), Mayer manages to make a complicated subject accessible for those with more interest than actual knowledge. An informative look at a hitherto enigmatic but influential institution. --S. Ketchum The Fed has entered a new era, and hardly anyone understands the rules of its game. Where once it could control the economy by controlling what the banks did, it now must push directly on the markets. But how? Why do interest-rate changes sometimes move the markets as expected, and sometimes fail to have any effect? What else is the Fed doing that might affect asset prices and growth rates? The links between Fed decisions and market reactions have become far more complicated and confused than ever before. What is an investor to make of it? In The Fed, one of the world's best financial journalists offers a major new explanation of how the Fed works and how its world has changed. Martin Mayer is the bestselling author of The Bankers and The Bankers: The Next Generation, among many other books. He knows more about the banking system, the markets, and the Federal Reserve than anyone else writing today. The Fed is the first book to explain why all the old rules for Fed watchers are no longer operative, and what it is that investors must know to understand the Fed today. For anyone who wants to know why Alan Greenspan is hailed as the second most powerful man in the United States, The Fed is essential reading. Mayer offers many behind-the-scenes stories from past and present Fed administrations, and he explains the overlooked significance of recent dramatic expansions in the Fed's powers and perks. Why does the Fed care about the difference between 30-year and 29-year bond yields? Why and how did the Fed join with its district banks in organizing the bailout of Long Term Capital Management? How was the age-old war between the Fed and the Comptroller of the Currency finally resolved in 1999? Why has the increased "sunshine" of announcing market interventions and posting proceedings of the Federal Open Market Committee not led to greater market stability? Why did Greenspan make the key decision of the Clinton boom years -- to let the good times roll while unemployment sank to record lows -- despite all historical evidence that it would be inflationary? These are just some of the questions answered in this wide-ranging, sharp, and entertaining book.
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