<SPECIAL FEATURE>
August 17, 1999
Interpreting Greenspeak: Berry and Wessel
by
The challenge for us, though, is that the G-man typically speaks a language grounded in suspicion. He rarely appears to say exactly what he means or to mean exactly what he says. Greenspeak is a master at the art of equivocation. On the one hand, his speeches read like a mystery wrapped inside an enigma and julienned into a Jamesian sentence which would put my mom to sleep. On the other hand, they give motivated deconstructionists plenty of room to hatch whatever interpretations they will.
Such slipperiness owes something to the fact that he's taken an increasingly pragmatic stance toward monetary policy and wants most of all to preserve his options. Then again, since markets move on his after-dinner belches, who can blame him for being coy? In any case, there remains a market for skilled translators of Greenspeak -- or better yet, commentators who presumably have an ear not far from Citizen G's own lips when he first whispers "rate cut" or "rate hike."
"There have been a number of journalists who seemed to be in the know for a one-time deal," observes Fed watcher Kim Rupert, senior economist at Standard & Poor's MMS. But today, when the Fed wants to leak something to the market, John Berry of The Washington Post (The Post) and David Wessel of the Wall Street Journal "seem to be the major sources on a consistent basis," she says.
By popular consent, Greenspan's leading mouthpiece is Berry, who's been covering the Fed for The Post since 1979. "It appears that whenever the Fed wants information to get out, he's one of the ones that information goes to," says Richard Cripps, chief market strategist at Legg Mason. That's why Cripps eats up Berry with his cornflakes each morning. John Hague, managing director and portfolio manager at PIMCO, home to the world's largest bond fund, concurs. "The market tends to react to his articles as if he has special insight into the Fed," Hague says.
Investors went into a tizzy in the spring of 1998 at the prospect that Wessel had keys to the temple that even Berry didn't. Wessel's April 27 story carried this headline: "Fed Ponders Rate Boost in Months Ahead/With No Slowdown in Sight, Officials Opted to Drop 'Neutral' Stance in March." The leak of a shift in the Fed's bias toward tightening spooked the markets, sending the Dow down 147 points. The idea that Wessel had scooped Berry had analysts puzzling over possible dissent within the FOMC. Were the inflation hawks trying to batter the markets while G wasn't looking?
The next day, Berry confirmed Wessel's report of the Fed's shift, but he included this rejoinder: "Fed sources cautioned that the central bank's decision to 'lean' toward higher short-term rates doesn't necessarily mean higher rates are on the way soon. Though Fed policymakers agreed at the March meeting that the economy seemed to be overheating, subsequent reports have suggested a cooling -- easing those concerns."
Jones says he chuckled at the sheer competition between the reporters. "Berry probably called up his contact at the Fed and said, 'Why are you giving this stuff to Wessel? Why didn't you give it to me?'" Other observers refer to the incident as a case of "sour Berry." Nonetheless, the market turned around and headed higher: Berry had spoken. Or was it G?
"No one from the Fed called me," insists Berry, who speaks with the deliberateness of a man who's listened to too much Greenspan. "This is one of those cases where people read my things and say, 'Oh, somebody at the Fed wanted to get the word out and called Berry.' Well, no, they don't call me," he says. "I wish they did." But does he talk to G? "I won't comment on that because the chairman only gives off-the-record interviews." Naturally.
Wessel hums the same tune. "Almost all stories that I've done on the Federal Reserve are described by outsiders as if they arrived in a sealed envelope with Alan Greenspan's return address," he says. "Well, I'm still waiting for that one. It just doesn't work that way." So he's never built a story around a leak? "I'm not sure I want to get absolute about this," he says warily.
Greenspan does give periodic background interviews to a select few Fed reporters, including Berry and Wessel. It's also widely believed that Greenspan sometimes leaks a story to confirm the market's interpretation of his remarks or to correct a misperception. That's why some think the piece Berry penned on April 28, 1998, was initiated by Greenspan himself.
However, a "Fed sources" attribution doesn't necessarily mean G himself. Reporters rely on high level Federal Reserve staffers, bank presidents, and governors -- all Fed sources. They also call on well-informed Fed watchers, from former FOMC members such as Lyle Gramley, Wayne Angell, and Lawrence Lindsay to Wall Street economists like Jones -- all "sources close to the Fed."
That creates a hierarchy of Fed stories. "If it doesn't say 'according to Fed sources,' then no one pays attention," asserts Jim Bianco, president of Bianco Research. Without that tag line, investors assume an article offers just analyst commentary spun with the reporter's own sense of Fed reality. That can be useful but not like a bona fide leak.
However, S&P's Rupert argues that the "sheer volume of 'Fed sources' stories and the number of times the market moved on them and guys got burned" means reporters just don't have the power they once did. Several people point to Steve Beckner of the wire service Market News as someone who once coined hot Fed news but has now lost some of his currency because his stories seem too often merely sensational rather than truly valuable.
Next -- Opening Up the Temple