The Fed chair who fueled the boom times
For nearly 20 years, Alan Greenspan held unmatched power over the U.S. economy. Appointed chairman of the Federal Reserve in 1987, and maintaining the role under Republican and Democratic administrations, Greenspan oversaw an era of prosperity that made him an unlikely celebrity. At the height of his power, his name was known by 90% of Americans. Yet his status as the maestro of American monetary policy was complicated by the 2008 financial crisis, which many saw as an overdue reckoning caused by his policies. Greenspan himself expressed ambivalence about his rock-star status. “From my earliest days, I had viewed myself as an expert behind the scenes,” he said in 2007. “I’ve never been entirely comfortable being cast as the person who calls the shots.”
Born in New York City as “the only child of parents who would soon divorce,” said The Washington Post, Greenspan was raised by his single mother. Gifted with a prodigious talent for numbers, he chose instead to pursue a career as a musician, attending Juilliard and playing clarinet in a jazz band. During breaks between sets, he didn’t drink or smoke with the other band members but read books about finance, and ultimately he decided to return to New York to study economics, earning a master’s degree from New York University. In his 20s, he identified as a libertarian and became an acolyte of the philosopher Ayn Rand, persuaded by her conviction that capitalism was both pragmatic and moral. He worked as an economic analyst for a think tank before launching his own economics consulting firm, and agreed in 1968 to serve as Richard Nixon’s coordinator on domestic policy. In subsequent years, Greenspan held numerous influential advisory positions, including chairman of the Council of Economic Advisers under Gerald Ford. In 1977, NYU awarded him a Ph.D. in economics based on his published research and papers on economic theory.
Just two months after Ronald Reagan appointed him to “the job that would define his career” came Black Monday, said The Economist. It was the biggest stock market crash in history, bigger than the 1929 crash that spurred the Great Depression. Greenspan’s response, flooding the markets with money, fueled a rally credited with saving the economy. The experience affirmed his belief that confidence in America’s economic resilience — and policies that encouraged growth while minimizing government regulation — would be rewarded. Though much of his tenure was marked by falling unemployment, said NPR.org, Greenspan “broke with tradition” by keeping interest rates low — a gamble that paid off when inflation remained tame.
In the boom years that followed, he “achieved a level of fame and influence rivaled only by U.S. presidents,” said The Wall Street Journal. His celebrity wedding to NBC News correspondent Andrea Mitchell was officiated by Justice Ruth Bader Ginsburg. Reappointed by George H.W. Bush, Bill Clinton, and George W. Bush, he maintained the Fed’s independence as he continued to promote his laissez-faire principles. Though Greenspan famously warned investors against “irrational exuberance” in 1996, prompting a brief global sell-off, his Wall Street–friendly policies were credited with ushering in an era of American prosperity. He retired from the Fed after five terms in 2006, his economic principles apparently vindicated.
Yet Greenspan’s record was also defined by “the destructive consequences of forces that emerged on his watch,” said The New York Times. His belief that the market could be trusted to govern itself was challenged by the near collapse of the mortgage market in 2008, sparked by predatory lending practices enabled by deregulation. Testifying before a congressional panel, Greenspan admitted he’d “made a mistake” in assuming that banks and funds would act in the best interests of their shareholders. In the years after his retirement, he remained a fixture on the D.C. cocktail circuit, writing books and giving interviews defending his legacy. “Did we make mistakes? You bet we made mistakes,” he said. “But I thought our record was fairly good.”
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