Admittedly, Lansing didn't say outright that the Fed is either toothless or reckless. But it wasn't difficult to draw such inferences from his report, which reflect the economist's personal views. He declined to comment further.

Shh ... Don't Tell Uncle Alan.

The official view from the central bank is that the sluggishness in business investment is due to "shocks," such as the Sept. 11, 2001, terror attacks, the Iraq war and corporate accounting scandals, which have subdued business and investor confidence. "Alternatively, in the aftermath of what many consider to be the greatest speculative bubble in history, it is quite possible that investment is being restrained by fundamental factors that will take longer to overcome," Lansing proposed.

These factors include, most prominently, vast overspending during the boom years. From 1996 to 2000, real business fixed-investment rose at an average compound annual rate of 10% per year, about 2.5 times faster than overall economic growth, he observed. "It is now clear that the investment boom of the late 1990s was overdone."

The Fed economist drew a connection between the investing boom and the stock market bubble. Without naming names (such as Greenspan), he wrote about how belief in the so-called New Economy, as well as one-time events such as Y2K, helped facilitate these "mutually reinforcing phenomena."

The Street

-- Anonymous, June 20, 2003