Alan Greenspan, the Federal Reserve chairman whose deft handling of economic crises made him one of the most celebrated figures in American finance before the 2008 collapse shattered his reputation, died at 100.
For nearly two decades, Greenspan wielded enormous influence over the world's largest economy. Appointed by Ronald Reagan in 1987, he served under four presidents and earned mythic nicknames: the Oracle, the Wizard, the Maestro. He steered the US through the Black Monday crash of 1987, the Asian financial crisis a decade later, and the shock of 9/11. Between 1991 and 2001, he presided over one of the longest booms in American history.
By 2000, his status seemed unshakeable. Economist Justin Martin captured the zeitgeist: "By the dawn of the new millennium, it was nearly impossible to find anyone in America who was not gaga over Greenspan."
That apotheosis proved fleeting. The financial catastrophe of 2008 forced a reckoning. Greenspan had left office two years earlier, but the crisis emerged directly from the deregulated landscape he had championed: lax oversight, exotic derivatives, sub-prime mortgages, and a housing bubble inflated by low rates maintained on his watch.
A congressional inquiry concluded Greenspan bore responsibility alongside the financial institutions that had collapsed. He and other regulators had spent three decades dismantling safeguards and championing self-regulation, the report found, stripping away protections that might have prevented catastrophe.
In a 2008 House hearing, Greenspan made a stunning admission. He acknowledged a fundamental flaw in the libertarian ideology that had shaped his entire career. "I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," he said.
That worldview had been instilled by Ayn Rand. Greenspan met the Russian-born author in 1952 and spent 15 years as a regular in her New York intellectual circle. Rand believed capitalism thrived when people acted from rational self-interest, free from government meddling. She called Greenspan "my disciple philosophically." Yet as Fed chairman, he constantly intervened, tinkering with interest rates and orchestrating government bailouts, contradictions he never fully resolved.
Before ascending to power, Greenspan had an unconventional path. He began as a saxophonist and clarinetist in a New York swing band, then founded Townsend-Greenspan, a forecasting firm that identified market trends. He worked as an economic adviser to Richard Nixon's 1968 campaign and later served as chair of the Council of Economic Advisers under Gerald Ford before Reagan tapped him for the Fed.
The 1987 crash came just two months into his tenure. The Dow plunged 22.6% in a single day. The Fed issued a reassuring statement pledging liquidity support, and the markets stabilized. The episode established Greenspan's credibility as a crisis manager.
His relationship with George H.W. Bush turned acrimonious when Greenspan resisted rate cuts the president wanted to stimulate the economy. Bush later blamed Greenspan publicly for his defeat in 1992, a show of conflict that paradoxically strengthened Greenspan's reputation for independence.
With Bill Clinton, Greenspan found alignment. Though a lifelong Republican advising a Democratic president, Greenspan embraced Clinton's push for deregulation and deficit reduction. Clinton's two terms coincided with soaring stock markets, job growth, rising productivity, and low inflation. Greenspan also orchestrated a $50 billion bailout of the Mexican peso in 1995.
Greenspan cultivated an air of inscrutability. Financiers and journalists parsed his every utterance for hints about future interest rate moves. He leaned into the mystique, often speaking in deliberately vague and convoluted language. In 1996, he offered one of his most quoted lines: "I know you think you understand what you thought I said, but I'm not sure you realise that what you heard is not what I meant."
That same year, he sparked a panic in Tokyo with a brief phrase buried in a speech about "irrational exuberance" in stock valuations. The remark came to him while soaking in a bathtub, where he spent 90 minutes each morning due to chronic back pain.
His relationship with George W. Bush proved cool. They clashed over how to respond to the dotcom collapse in 2001. After the 9/11 attacks, however, Greenspan moved decisively, pumping $100 billion into the monetary system and slashing interest rates to restore confidence.
When Greenspan left the Fed in 2006, he received an honorary knighthood from Queen Elizabeth II. He went on to publish three books: "The Age of Turbulence" in 2007, "The Map and the Territory" in 2013, and "Capitalism in America" in 2018. In 2018, he criticized Donald Trump's proposed tariffs as "insane," warning that trade war would hurt both the US and China.
Born in New York during the Great Depression, Greenspan grew up in cramped quarters in Washington Heights after his parents divorced. His mother worked as a furniture store sales assistant. He studied music at Juilliard, joined a swing band, then shifted to economics at New York University, earning a BA in 1948 and an MA in 1950. He never completed his Columbia PhD but was awarded one by NYU in 1977.
He married artist Joan Mitchell in 1952, but the marriage was annulled a year later. In 1997, he married television journalist Andrea Mitchell, who survives him.
Author James Rodriguez: "Greenspan's fall from grace is a cautionary tale about the seductive power of ideology and the limits of unchecked authority, no matter how brilliant the voice wielding it."
Comments