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Alan Greenspan

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Alan Greenspan
Born (1926-03-06) March 6, 1926 (age 100)
Washington Heights, New York City, U.S.
OccupationEconomist
Years active1948–present
Known for13th Chairman of the Federal Reserve (1987–2006)

Alan Greenspan (born March 6, 1926) is a prominent American economist who held the position of the 13th chairman of the Federal Reserve from 1987 until 2006. Following his departure from the Fed, he engaged in private advisory and consulting work through his company, Greenspan Associates LLC.

Appointed by President Ronald Reagan in August 1987, Greenspan was subsequently reappointed to multiple four-year terms, serving until his retirement on January 31, 2006. His tenure ranks as the second longest after William McChesney Martin. His successor, Ben Bernanke, was named by President George W. Bush. Known for a reserved and measured public style despite a high media profile, Greenspan’s background in consulting set him apart and led to comparisons with a "rock star."[1] However, Democratic figures accused him of injecting political bias into his role, particularly due to his advocacy for Social Security privatization and tax reductions.[2]

Detractors contend that the Federal Reserve’s accommodative monetary policies under Greenspan—including the so-called "Greenspan put"—played a role in inflating the dot-com bubble and later the subprime mortgage crisis, which emerged soon after his exit and tarnished his legacy.[3] Yale economist Robert Shiller observed that following stock market declines, real estate became the primary channel for speculative investments.[4] Greenspan argued that the housing bubble stemmed not from low short-term interest rates but rather from a global decline in long-term rates caused by imbalanced savings patterns between developing and developed nations.[5]

Early life and education

Born in New York City’s Washington Heights neighborhood on March 6, 1926, Greenspan’s father, Herbert Greenspan, was a stockbroker and consultant of Romanian Jewish heritage. His mother, Rose Goldsmith, descended from Hungarian Jewish roots. After his parents separated, he was raised primarily by his mother and maternal grandparents, who were immigrants from Russia.

He graduated from George Washington High School in 1943 alongside fellow student John Kemeny. During this period, Greenspan studied clarinet and saxophone and attended the Juilliard School between 1943 and 1944 focusing on clarinet performance. He also played with Woody Herman’s band, which included Leonard Garment—later White House special counsel to President Nixon.

In 1945, Greenspan began studies at New York University’s Stern School of Business, where he graduated summa cum laude with a B.A. in economics in 1948 and earned an M.A. in economics by 1950. He pursued additional graduate economic studies under Arthur Burns at Columbia University but discontinued them due to professional obligations at Townsend-Greenspan & Company.

Greenspan received his Ph.D. in economics from New York University in 1977. Upon becoming Federal Reserve chairman in 1987, he requested removal of his doctoral dissertation from university archives. In 2008, Barron's obtained a copy revealing that it analyzed rising home prices and predicted an eventual collapse of the housing market bubble.

Before the Federal Reserve

While studying economics at New York University, Greenspan gained experience working with Eugene Banks—a managing director at Brown Brothers Harriman—in equity research. From 1948 through 1953, he served as an analyst at the National Industrial Conference Board (now known as the Conference Board), a business-oriented think tank based in New York City. Prior to leading the Federal Reserve, Greenspan spent over three decades (1955–1987) as chairman and president of Townsend-Greenspan & Co., an economic consulting firm headquartered in New York City. His tenure was briefly interrupted between 1974 and 1977 when he chaired the Council of Economic Advisers under President Gerald Ford.

In 1968, Greenspan took on the role of domestic policy coordinator for Richard Nixon’s presidential nomination campaign. He also held board memberships at several major corporations including Alcoa, Automatic Data Processing, Capital Cities/ABC, General Foods, J.P. Morgan & Co., Morgan Guaranty Trust Company, Mobil Corporation, and Pittston Company. Between 1982 and 1988, he served on the board of directors for the Council on Foreign Relations and became a member of the influential financial advisory Group of Thirty in 1984.

Chairman of the Federal Reserve

During my time at the Federal Reserve, I acquired a new form of communication known as "Fed-speak". It quickly becomes necessary to speak with considerable ambiguity.
— Alan Greenspan

On June 2, 1987, President Ronald Reagan put forward Greenspan as the successor to Paul Volcker for the chairmanship of the Federal Reserve Board, with the United States Senate confirming his appointment on August 11, 1987. Investor and analyst Jim Rogers observed that Greenspan actively campaigned for this role.

In the aftermath of the 1987 stock market crash, Greenspan declared the Federal Reserve’s commitment to supplying liquidity, launching monetary measures that later became known as the Greenspan put. Although George H. W. Bush criticized the Fed’s slow reaction, Democratic President Bill Clinton chose to reappoint him and sought his advice on economic matters, including backing Clinton’s 1993 deficit reduction initiatives. Greenspan’s monetary stance was largely monetarist and consistent with the Taylor rule. He also played a pivotal role in coordinating the U.S. financial rescue of Mexico during the 1994–1995 Mexican peso crisis.

In 2000, Greenspan implemented several interest rate hikes, which some attributed to triggering the collapse of the dot-com bubble. Nevertheless, Nobel Prize winner Paul Krugman contended that Greenspan did not attempt to restrain market exuberance but rather responded after the bubble had burst. In January 2001, he endorsed President Bush’s tax cut proposals, citing existing federal budget surpluses.

Following the September 11 attacks, Greenspan guided the Federal Reserve in lowering interest rates to an unprecedented low of 1% by 2004 to support economic recovery. In a 2002 Congressional report, he warned of heightened risks within financial markets and advocated for enhanced regulatory oversight. Critics such as Steve Forbes held his expansive monetary policy responsible for surging commodity and gold prices.

Greenspan advised senior officials in George W. Bush’s administration that ousting Saddam Hussein was essential to preserving oil market stability, expressing concerns that disruptions could trigger global economic turmoil. He cautioned that Saddam’s control over the Straits of Hormuz posed a significant threat to Western economies.

In May 2004, President Bush nominated Greenspan for an unprecedented fifth term; prior appointments had been made by Reagan, George H. W. Bush, and Clinton.

During a May 2005 address, Greenspan underscored the importance of derivatives in maintaining banking system resilience but acknowledged potential dangers stemming from market concentration, especially regarding over-the-counter (OTC) U.S. dollar interest rate options.

He opposed imposing tariffs on China related to its currency policies, advocating instead for supporting displaced American workers through unemployment benefits and retraining programs.

Greenspan’s tenure concluded on January 31, 2006, when he was succeeded by Ben Bernanke. Notably, throughout his service from 1987 until 2005, Greenspan avoided participating in televised interviews.

Post-Federal Reserve Career

Following his departure from the Federal Reserve, Greenspan established Greenspan Associates LLC, an economic consulting firm, and took on an honorary, unpaid role at HM Treasury in the United Kingdom.

On February 26, 2007, Greenspan predicted a potential recession in the U.S. occurring by early 2008, citing stabilizing corporate earnings as a key factor. The very next day, the Dow Jones Industrial Average plummeted by 416 points, marking a 3.3% decline in its value.

In May 2007, Greenspan joined Pacific Investment Management Company (PIMCO) as a special consultant, participating in economic discussions and advising bond managers on Federal Reserve interest rate strategies. By August of that year, Deutsche Bank had engaged him as a senior advisor to support their investment banking division and clientele.

In January 2008, hedge fund Paulson & Co. brought Greenspan on board as an exclusive adviser. Paulson had foreseen the collapse of the subprime mortgage market and collaborated with Goldman Sachs to structure and market related financial derivatives. Some analysts connected this housing market failure to policies implemented during Greenspan’s tenure at the Fed.

On April 30, 2009, Greenspan appeared before a U.S. Senate subcommittee to advocate for the H-1B visa program, asserting that the existing visa cap was "far too small." He emphasized that skilled immigration was essential to counterbalance the retiring baby boomer generation and to meet ongoing U.S. economic demands.

Memoir

Greenspan authored his memoir titled The Age of Turbulence: Adventures in a New World, which was released on September 17, 2007. Much of the manuscript was written by hand while he bathed—a practice he adopted following a back injury in 1971. The book reflects on his public service and economic career, addressing capitalism, global economic challenges, and prospective issues.

Within the memoir, Greenspan critiques President George W. Bush, Vice President Dick Cheney, and the Republican-led Congress for abandoning core Republican fiscal principles related to spending and deficits. He criticizes Bush for failing to veto spending legislation that exacerbated budget deficits and for prioritizing political objectives over sound economic management. Greenspan remarks, "They swapped principle for power. They ended up with neither. They deserved to lose [the 2006 election]."

Conversely, he commends Bill Clinton for maintaining a "consistent, disciplined focus on long-term economic growth." Greenspan describes Richard Nixon as highly intelligent but "sadly paranoid, misanthropic and cynical," while portraying Gerald Ford as "as close to normal as you get in a president," though noting he was never elected.

Looking ahead to U.S. economic policy, Greenspan advocates for enhancements in primary and secondary education to help narrow income disparities between high-income earners and most workers whose wages have not kept pace with globalization or GDP expansion.

Objectivism

In the early 1950s, Greenspan developed ties with novelist and Objectivist philosopher Ayn Rand through his first wife, Joan Mitchell. Rand gave him the nickname "the undertaker" owing to his reserved personality. Originally a logical positivist, Greenspan was converted to Rand’s Objectivist philosophy by her associate Nathaniel Branden. He became part of Rand’s inner circle known as the Ayn Rand Collective and contributed essays supporting ideas such as the gold standard to her 1966 publication Capitalism: The Unknown Ideal. During the 1960s, he delivered a ten-lecture series titled "The Economics of a Free Society" under the Nathaniel Branden Institute that addressed topics including prosperity, government intervention, and critiques of collectivist economic theories. Rand publicly supported Greenspan at his 1974 swearing-in as chairman of the Council of Economic Advisers. Their friendship persisted until her passing in 1982.

Greenspan has been criticized by Objectivists like Harry Binswanger who contend that his Federal Reserve policies deviated from free-market ideals. Greenspan acknowledged that democratic governance requires compromise and noted that under a gold standard without a central bank, the U.S. economy performed well. In a congressional hearing in 2008, he conceded shortcomings in his strict free-market beliefs that rejected certain regulations. Nevertheless, he maintained that laissez-faire capitalism remains the optimal system within a democracy, attributing errors more to miscalculations of risk than flaws in the ideology itself.

E. Ray Canterbery has examined Greenspan’s association with Rand and concluded that her influence adversely impacted his approach to monetary policy decisions.

Housing bubble

In the aftermath of the 2007 subprime mortgage collapse and credit turmoil, Greenspan acknowledged the existence of a housing market bubble in the United States, cautioning about potential "large double digit declines" in property values. He conceded that he did not fully perceive the bubble until late 2005 and into 2006. Greenspan attributed the bubble primarily to falling real long-term interest rates but also observed that the expansion of global long-term securities markets had diminished central banks’ ability to influence conditions.

Following the September 11 attacks and subsequent economic challenges, the Federal Open Market Committee progressively lowered the federal funds rate, eventually reaching unprecedented lows near 1%. Greenspan claimed these rate reductions stimulated home purchases and refinancing activity by increasing homeowners’ ability to extract equity. Critics contend that these historically low rates fueled the housing bubble by encouraging borrowers to take on adjustable-rate mortgages (ARMs), which exposed them to payment increases when rates reset.

In a 2004 address, Greenspan recommended that more homeowners consider ARMs as viable alternatives to fixed-rate loans. Soon after, he initiated a series of interest rate hikes from 1% up to 5.25%, a factor linked to the onset of the subprime mortgage crisis due to many ARMs resetting at significantly higher rates. Greenspan later expressed frustration over criticism targeting this speech, emphasizing that he also endorsed fixed-rate mortgages and supported offering a variety of mortgage options.

He underscored innovations in subprime lending practices, credit scoring models, and specialized credit programs that broadened access to financing, leading to rapid growth in subprime mortgages—from roughly 1-2% in the early 1990s to about 10% of all mortgages by the mid-2000s. Nevertheless, the collapse of the subprime lending sector in 2007 triggered widespread lender failures and soaring foreclosure rates, resulting in criticism directed at Greenspan for his perceived role in enabling the housing bubble and ensuing financial instability.

Analysts at Businessweek in 2004 largely attributed the housing bubble to Federal Reserve policies maintaining low interest rates, which encouraged risky borrowing via ARMs. In 2008, economist Joseph Stiglitz criticized Greenspan’s reliance on self-regulation instead of government oversight. Despite this, Greenspan maintained his faith in free-market principles but acknowledged in his 2007 autobiography that extended periods of low risk premiums contributed to financial turmoil.

In 2009, Robert Reich condemned Greenspan for fostering the housing bubble by reducing rates to 1%, which led banks to lend excessively without adequate regulatory safeguards. During congressional testimony in October 2008, Greenspan admitted he had overestimated free markets’ capacity for self-correction and underestimated the risks posed by lax mortgage lending standards. While some Republican lawmakers blamed Fannie Mae and Freddie Mac for the crisis, Greenspan assigned greater responsibility to Wall Street’s securitization of risky loans.

2008 financial crisis and the Great Recession

In March 2008, Greenspan wrote in the Financial Times Economists' Forum that the 2008 financial crisis was probably the most severe economic downturn since World War II. He stressed that "market flexibility and open competition" are essential defenses against economic collapse and cautioned against reforms that might restrict these forces. His stance provoked criticism from economists including J. Bradford DeLong, Paul Krugman, and Alice Rivlin, who connected Greenspan’s policies with disruptions in financial markets.

Greenspan defended his approach by explaining that his economic framework prevented him from taking action against the housing bubble—a position he described as not "leaning against the wind." Although acknowledging shaken assumptions, he remained confident in free-market mechanisms. Supporters such as Martin Wolf, Stephen S. Roach, and Allan Meltzer argued that Greenspan was unfairly made a scapegoat.

An October 2008 article in The Washington Post detailed Greenspan’s strong opposition to regulating derivatives and his efforts to weaken attempts by the Commodity Futures Trading Commission at oversight. However, he did support improvements to mark-to-market accounting rules aimed at preventing distressed asset valuations during crises.

Greenspan collaborated with officials like Treasury Secretary Lawrence Summers and SEC Chairman Arthur Levitt on a 1999 report advocating for excluding many over-the-counter derivatives from regulation, influencing passage of the Commodity Futures Modernization Act of 2000.

During congressional testimony in October 2008, Greenspan conceded he was "partially" mistaken in opposing certain regulations and expressed surprise that lending institutions failed to safeguard shareholder equity as anticipated. He acknowledged a "flaw" within his free-market ideology but was uncertain whether this flaw was permanent.

Critics such as Matt Taibbi condemned what became known as the Greenspan put—the Federal Reserve's policy of bailouts combined with low interest rates—which they argue enabled repeated speculative bubbles with minimal losses for banks. Taibbi characterized Greenspan as a "classic con man" who earned Wall Street’s favor over two decades.

The documentary Inside Job includes Greenspan among those held accountable for causing the crisis. Additionally, Time magazine listed him among its "25 People to Blame for the Financial Crisis."

Political stance and claims of office politicization

Greenspan describes himself as a "lifelong libertarian Republican". Critics from the free-market camp argue that during his tenure as Chair of the Federal Reserve, he diverged from these principles by endorsing extended periods of artificially suppressed interest rates, which conflicted with his earlier promotion of sound money and limited government. These critics assert that such policies played a role in fostering asset bubbles and encouraging moral hazard.

In March 2005, Greenspan's endorsement of President George W. Bush's initiative to partially privatize Social Security attracted strong rebuke from Democratic leaders, including Senate Minority Leader Harry Reid, who labeled him "one of the biggest political hacks in Washington," and House Minority Leader Nancy Pelosi, who raised concerns about the Federal Reserve's autonomy. Democratic Congressman Barney Frank also voiced opposition to Greenspan's support for Bush’s Social Security private accounts proposal. Greenspan defended his position by asserting that the plan contained "the seeds of developing full funding" through private accounts.

On the other hand, Republican Senator Mitch McConnell commended Greenspan as an independent Fed chairman who contributed positively under administrations from both parties. Economist Paul Krugman criticized Greenspan for what he perceived as insincerity and a breach of trust, noting Greenspan’s consistent alignment with Bush administration policies.

Republican Senator Jim Bunning, opposing Greenspan’s fifth confirmation, argued that Greenspan should confine his remarks to monetary policy rather than fiscal issues. Nonetheless, Greenspan had previously supported fiscal measures, including President Clinton’s 1993 deficit reduction strategy that involved tax hikes and spending cuts.

During an October 2011 lecture discussing the Occupy movement, Noam Chomsky referenced Greenspan’s 1997 Senate testimony as illustrative of self-interested elite attitudes. In that testimony, Greenspan connected increasing worker insecurity to low inflation and inflation expectations, which he claimed encouraged long-term investment.

Personal life

Greenspan’s marriage to Canadian artist Joan Mitchell in October 1952 was annulled after ten months. In the late 1970s, he was romantically linked to news anchor Barbara Walters. He began a relationship with journalist Andrea Mitchell in December 1984 and married her in April 1997; this is considered his first legal marriage due to the prior annulment.

Honors

Additional accolades include the 1976 U.S. Senator John Heinz Award for Greatest Public Service by an Elected or Appointed Official from Jefferson Awards, election as a fellow of the American Statistical Association in 1989, and induction into the American Philosophical Society in 2000.

Greenspan was honored with an honorary knighthood by Queen Elizabeth II in 2002. Other distinctions include receiving the Dwight D. Eisenhower Medal for Leadership and Service (2004), being the inaugural recipient of the Harry S. Truman Medal for Economic Policy (2005), and earning the Thomas Jefferson Foundation Medal in Citizen Leadership from the University of Virginia (2007). In 2012, he was presented with NYU’s Eugene J. Keogh Award for Distinguished Public Service.

Scholastic

Honorary Degrees
Location Date Institution Degree Awarded Delivered Commencement Speech
Template:Country data Indiana May 21, 1995 University of Notre Dame Doctor of Laws (LL.D)
Template:Country data Pennsylvania 1998 University of Pennsylvania Doctor of Laws (LL.D)
Template:Country data Massachusetts June 10, 1999 Harvard University Doctor of Laws (LL.D) Yes
Template:Country data Connecticut 1999 Yale University Doctor of Humane Letters (DHL)
Template:Country data Scotland 2005 University of Edinburgh Doctorate
Template:Country data New York December 14, 2005 New York University Doctor of Commercial Science

Books

See also

Works cited

Further reading=

External links

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