New York post
November 6, 2001 -- MEMBERS of the Bush administration had barely left their first butt prints in the White House chairs earlier this year when someone recognized a problem. The appointments at the Treasury Department were heavy on business types but completely omitted a Wall Street fixer - a guy or gal who, like Robert Rubin before them, could keep the financial markets in line during a time of crisis.
Now, we've got a crisis - both in the economy and on Wall Street.
And last week the Bushies showed that they too know how to deal with Wall Street angst, thanks in large part to Peter Fisher, a former high-flyer at the New York Federal Reserve Bank who I've written about before.
Fisher the fixer was a late arrival in the Bush administration this summer, but he may be the most important guy in Washington right now. What he is doing is a lot more creative - and dangerous - than anything coming out of the ho-hum Federal Reserve these days.
The Fed, of course, gets all the press, and that'll continue because many of my colleagues just don't get it.
So there will be a press frenzy again today when, at precisely 2:15 p.m., Alan Greenspan announces the tenth interest rate cut of the year. The fed funds rate will probably be lowered another half percentage point to 2 percent.
But face it - the rate cuts aren't working. Unemployment soared in October and it wasn't just because of bin Laden. The economy shrank last month and will probably shrivel up in the fourth quarter of this year.
The cute term for what's happen is that the Fed is "pushing on a string." It's trying to force people and companies to borrow money and boost the economy.
Try it. Get a piece of string and push on it. You'll move it a little, but not much. That's the economy today.
Even worse, the Fed's nine previous rate cuts aren't helping. Greenspan is getting dangerously close to making the Fed look irrelevant.
The Fed's impotence is causing Washington to take dangerous actions.
I've already discussed in this column how it appears that the stock market has been rescued by government-sponsored buying programs.
This idea comes from the writings of a guy named Robert Heller, a former member of the Federal Reserve Board. Right after he left the board in 1989, Heller suggested that the Fed directly bail out the market in times of crisis - just like the one we now have.
What the Treasury did last week was even cuter. It announced that the government would no longer sell new 30-year bonds.
The long bonds had been acting like renegades during this rate-cut cycle. At first, the rates on the bonds actually rose even as the Fed was trying to reduce borrowing costs.
Lately the rate on 30-year bonds has been declining, but not by as much as the Fed and the Bush administration would want. So the announcement last week to discontinue that bond - which I'm told was Fisher's inspiration - eliminated that problem.
The move also seems to have helped stock prices, which have been rallying nicely since last Wednesday's bond news broke. With bonds and their relatively higher yields eliminated as an investment choice, stocks benefited.
Let's look at the risks.
First, the artificial rise in stock prices manufactured through Washington's financial maneuverings will probably not last. Even if corporate profits held at current levels - which they won't - stocks are still very overpriced and vulnerable to a big drop.
Second, by eliminating the 30-year bond the government will have to borrow its money shorter term. And those borrowings will increase if Washington decides on another tax cut. Washington could end up paying a whole lot more for money over the next generation.
But Peter will probably fix that too.