Days of Fire: Bush and Cheney in the White House

by Peter Baker

THE WHITE HOUSE was pushing through another important appointment at the same time, one not as visible but arguably more important to the rest of their time in office. After eighteen years as the nation’s sometimes inscrutable chairman of the Federal Reserve, Alan Greenspan was stepping down. During his long tenure, Greenspan had tamed inflation, coolly managed crises, and presided over a period of significant economic growth with low unemployment. But there were warning signs of trouble ahead. Riding a wave of easy credit in the form of subprime mortgages, Americans were buying homes as never before, many stretching beyond their means. House prices had jumped nearly 25 percent in two years, creating a bubble that was pushing the economy along. Wall Street was taking those risky mortgages, repackaging them, and selling them as investments. Greenspan had reassured policy makers that this was not actually a bubble, only “froth” in certain local markets that could cool off. Other economists, though, worried that house prices had risen so fast on the backs of unsustainable mortgages that the bubble could collapse and bring on an economic downturn. To replace Greenspan, Bush again turned to Cheney. Much as he did with the Supreme Court nominees, Cheney winnowed the list, then interviewed finalists in his West Wing office for ninety minutes each. In the end, he settled on Ben Bernanke—a Princeton University economist, former member of the Fed Board of Governors, and current chai...