Alan Greenspan


Alan Greenspan

Infobox_President | name =Alan Greenspan
nationality = American


imagesize =176px
order =13th Chairman of the Federal Reserve
term_start =August 11, 1987
term_end =January 31, 2006
president =Ronald Reagan
George H. W. Bush
Bill Clinton
George W. Bush
predecessor =Paul Volcker
successor =Ben Bernanke
birth_date =birth date and age|1926|3|6
birth_place =New York, New York
death_date =
death_place =
alma_mater =New York University
spouse =Andrea Mitchell
profession =Economist|

Alan Greenspan (born March 6, 1926 in New York City) is an American economist and was from 1987 to 2006 the Chairman of the Federal Reserve of the United States. He currently works as a private advisor, making speeches and providing consulting for firms through his company, Greenspan Associates LLC.

First appointed Fed chairman by President Ronald Reagan in August 1987, he was reappointed at successive four-year intervals until retiring on January 31, 2006 after the second-longest tenure in the position. Greenspan was lauded for his handling of the Black Monday October 19, 1987, stock market crash that occurred very shortly after he first became chairman, as well as for his stewardship of the Internet-driven, "dot-com" economic boom of the 1990s. This expansion eventually ended in a burst in March 2000 leading to an economic downturn, including negative GDP growth in the first quarter of 2001. [cite news |first=Rachel |last=Konrad |authorlink= |coauthors=Kawamoto, Dawn |title=A year after the Net bubble burst, blame game begins |url=http://news.cnet.com/Assessing-the-carnage/2009-1017_3-253125.html |work= |publisher= |date=2001-03-08 |accessdate= ]

After 2001, some congressional leaders and others criticized him, for certain statements they found to overstep the Fed's traditional purview of monetary policy, [cite news |first=Chris |last=Wallace |authorlink= |coauthors= |title=Transcript: Nancy Pelosi on 'FOX News Sunday' |url=http://www.foxnews.com/story/0,2933,149556,00.html |work=FOXNews.com |publisher= |date=2005-03-06 |accessdate= ] and for other statements they saw as overly supportive of the policies of President George W. Bush. In 2004 Business Week Magazine criticized his keeping of low interest levels too long and his concurrent praise of sub-prime lending vehicles such as ARMs as leading to a housing bubble. [cite news |first=Peter |last=Coy |authorlink= |coauthors=Miller, Rich |title=Is A Housing Bubble About To Burst? |url=http://www.businessweek.com/magazine/content/04_29/b3892064_mz011.htm |work=Business Week |publisher= |date=2004-07-19 |accessdate= ] Some, including Nobel Prize-winning economist Joseph E. Stiglitz, assign a large degree of culpability for the devastating Economic crisis of 2008 to Greenspan. Stiglitz stated that Greenspan “didn't really believe in regulation; when the excesses of the financial system were noted, [he and others] called for self-regulation—an oxymoron.” [cite news |first=Joseph |last=Stiglitz |authorlink= |coauthors= |title=How to prevent the next Wall Street crisis |url=http://www.cnn.com/2008/POLITICS/09/17/stiglitz.crisis/ |work= |publisher= |date=2008-09-17 |accessdate= ] Greenspan, according to "The New York Times", says he himself is blameless. [cite news |first=Jackie |last=Calmes |authorlink= |coauthors= |title=In Washington, Financial Furor Is a First-Rate Chance to Assess Blame |url=http://www.nytimes.com/2008/09/18/business/18cong.html |work=New York Times |publisher= |date=2008-09-17 |accessdate= ]

All considered, during his tenure Greenspan was the leading authority on American domestic economic and monetary policy, and his active influence continues. [cite news | url=http://www.canada.com/nationalpost/financialpost/story.html?id=1b18ccd6-a9d8-4167-bf2c-d3710c4c8c5f&k=6899 | title=Greenspan? Bernanke?: Who's the man? | author=Peter Morton | publisher=Financial Post (Canada) |date=2006-06-08 | accessdate=2007-11-08]

Biography

Greenspan was born in 1926 to a Hungarian Jewish family in the Washington Heights area of New York City. [ [http://www.alangreenspan.org Alan Greenspan Biography] ] The family name was anglicised from the German and Yiddish surname Grünspan. He studied clarinet at The Juilliard School from 1943 to 1944. [Aversa, Jeannine. [http://www.ohio.com/business/9705977.html "Greenspan opens up in new book"] , "Akron Beacon Journal", September 11, 2007. Accessed September 16, 2007. "A lover of classical and jazz music, Greenspan once worked as a jazz musician and studied the clarinet at Juilliard."] He is an accomplished saxophone player who played with Stan Getz. [Hagenbaugh, Barbara. [http://www.usatoday.com/money/economy/fed/2003-07-15-greenspanrocks_x.htm "The Alan Greenspan Project rocks on"] , "USA Today", July 16, 2003. Accessed September 16, 2007. "At the time, the band members did not know that early in life, the Fed chairman was a musician. He learned how to play the clarinet as a kid and played with famous saxophonist Stan Getz when they were both teenagers."] While in college, he played in a jazz band. He then attended New York University (NYU), and received a B.S. in Economics (summa cum laude) in 1948, and a M.A in Economics in 1950. Greenspan went on to Columbia University, intending to pursue advanced economic studies, but subsequently dropped out. At Columbia, Greenspan did study economics under the tutelage of future Fed chairman Arthur Burns, who constantly warned of the dangers of inflation. [cite book | title=Maestro: Greenspan's Fed and the American Economy | author=Bob Woodward] Much later, in 1977, NYU also awarded him a Ph.D. in Economics. He may not have done a dissertation, normally required for that degree. ["Barron's (2008). [http://online.barrons.com/article/SB120675340444773623.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_right Dr. Greenspan's Amazing Invisible Thesis] ] On December 14, 2005, he was awarded an honorary Doctor of Commercial Science degree by NYU, his fourth degree from that institution.

In the early 1950s, Greenspan began an association with famed novelist and philosopher Ayn Rand that would last until her death in 1982.cite news|url=http://www.nytimes.com/2007/10/14/books/review/Kinsley-t.html | title=Greenspan Shrugged | author=Michael Kinsley | publisher=The New York Times |date=2007-10-14 | accessdate=2007-11-08] He wrote for Rand’s newsletters and authored several essays in her book "". [ [http://usliberals.about.com/od/peopleinthenews/a/Greenspan1.htm Explaining Alan Greenspan - Disciple of Ayn Rand or George Bush? Or Both? ] ] Rand stood beside him at his 1974 swearing-in as Chair of the Council of Economic Advisers.

From 1948 to 1953, Greenspan worked as an economic analyst at The Conference Board, a business and industry oriented think-tank in New York City. From 1955 to 1987, when he was appointed as Chair of the Federal Reserve, Greenspan was Chairman and President of Townsend-Greenspan & Co., Inc., an economic consulting firm in New York City, a 33-year stint interrupted only from 1974 to 1977 by his service as Chairman of the Council of Economic Advisers under President Gerald Ford. In the summer of 1968, Greenspan agreed to serve Richard Nixon as his coordinator on domestic policy in the nomination campaign. [Stephen Ambrose: "" (1989) ISBN 0-671-52837-8] Greenspan also has served as a corporate director for Aluminum Company of America (Alcoa); Automatic Data Processing, Inc.; Capital Cities/ABC, Inc.; General Foods, Inc.; J.P. Morgan & Co., Inc.; Morgan Guaranty Trust Company of New York; Mobil Corporation; and The Pittston Company. [cite news| title=U.S. Senate Panel Votes for 4th Term for Fed Chairman Greenspan| author=Bloomberg News| publisher="Deseret News" | date=2000-02-01 See also verbatim list reproduced at Wharton School of Business, " [http://www.wharton.upenn.edu/whartonfacts/news_and_events/newsreleases/2005/p_2005_4_332.html Alan Greenspan, Chairman of the Board of Governors of Federal Reserve, Receives Dean’s Medal at Wharton School MBA Commencement] ".] He was a director of the Council on Foreign Relations foreign policy organization between 1982 and 1988. [cite web
url=http://www.cfr.org/about/history/cfr/appendix.html
title=The Council on Foreign Relations from 1921 to 1996 - Historical Roster of Directors and Officers
] He also served as a member of the influential Washington-based financial advisory body, the Group of Thirty in 1984.

Alan Greenspan has been married twice. His first marriage was to Joan Mitchell in 1952; the marriage ended in divorce one year later. He dated newswoman Barbara Walters in the late 1970s. In 1984, Greenspan began dating journalist Andrea Mitchell. Greenspan at the time was 58, and the also once divorced Mitchell was 20 years his junior at the age of 38. In 1997, they were married by Supreme Court Justice Ruth Bader Ginsburg.cite news | url=http://www.nytimes.com/2007/10/07/business/07offtheshelf.html | title=The Boy Behind the Global Theories | author=Stephen Kotkin | publisher=The New York Times |date=2007-10-07 | accessdate=2007-11-08]

Chairman of the Federal Reserve

On June 2, 1987, President Reagan nominated Dr. Greenspan as a successor to Paul Volcker as chairman of the Board of Governors of the Federal Reserve, and the Senate confirmed him on August 11, 1987. After the nomination, bond markets experienced their biggest one-day drop in 5 years. Just two months after his confirmation he was faced with his first crisis—the 1987 stock market crash.

On May 18, 2004, Greenspan was nominated by President George W. Bush to serve for an unprecedented fifth term as chairman of the Federal Reserve. He was previously appointed to the post by Presidents Ronald Reagan, George H. W. Bush and Bill Clinton. Greenspan was awarded the Presidential Medal of Freedom, the highest civilian award in the United States, by President George W. Bush in November 2005. [ [http://www.whitehouse.gov/news/releases/2005/11/20051109-10.html 2005 Presidential Medal of Freedom recipients] ] His honorary titles include Knight Commander of the British Empire, bestowed in 2002 and Commander of the Légion d'honneur (Legion of Honor).

Greenspan's term as a member of the Board ended on January 31, 2006, and Ben Bernanke was confirmed as his successor. Bernanke is a former chairman of the U.S. President's Council of Economic Advisers, and his appointment is seen in part as a move to effect a smooth transition.

After the Federal Reserve

In middle January 2008, hedge fund Paulson & Co employed Alan Greenspan as an adviser on economic issues and monetary policy. [ [http://news.independent.co.uk/business/news/article3342208.ece] .] This is the third private role given to Alan Greenspan, the first two being given by Deutsche Bank and bond investment company known as Pimco. As an adviser, Greenspan will advise Paulson & Co on economics issues surrounding United States and world financial markets.Monaghan, Angela. [http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/01/15/bcngreenspan.xml Greenspan joins hedge fund Paulson] , "Daily Telegraph", January 16, 2008. Accessed July 15, 2008.]

He will also counsel on monetary policy and falling housing prices and about a possible recession in the United States. Paulson & Co is famously known for its record profit making during 2007 by conducting bets against mortgage derivatives which earned the firm billions of dollars last year. The financial terms of the agreement were not disclosed and Greenspan must not, under the agreement, advise any other hedge fund manager while working for Paulson.

In February 2008 he spoke at the Jeddah Economic Forum. [ [http://jef.com.sa/jef2008/jef_2008.htm] .]

Greenspan wrote in the week of March 17, 2008 that the 2008-financial crisis in the United States is likely to be judged as the most wrenching since the end of World War II. [ [http://edition.cnn.com/2008/BUSINESS/03/21/us.recession.ap/index.html Worries grow of deeper U.S. recession - CNN.com ] ]

Later career

Greenspan now works as a private advisor making speeches and providing consulting for firms through his company, Greenspan Associates LLC. Directly following his retirement as Fed chairman, Greenspan accepted an honorary (unpaid) position at HM Treasury in the United Kingdom. In May 2007, Greenspan was hired as a special consultant by PIMCO to participate in Pimco’s quarterly economic forums and speak privately with the bond manager about Fed interest rate policy. [http://www.msnbc.msn.com/id/18703142/] In August 2007, Deutsche Bank announced that it would be retaining Greenspan as a Senior Advisor to its investment banking team and clients. [ [http://www.db.com/presse/en/content/press_releases_2007_3606.htm Deutsche Bank - Alan Greeenspan to consult for Deutsche Bank Corporate and Investment Bank ] ]

On February 26, 2007, Greenspan forecast a possible recession in the U.S. before or in early 2008. [ [http://www.msnbc.msn.com/id/17343814/ Greenspan warns of U.S. recession risk - Stocks & economy - MSNBC.com ] ] Stabilizing corporate profits are said to have influenced his comments. The following day, the Dow Jones Industrial Average closed at 12,216.24 dropping by 416 points and losing 3.3% of its value, the worst one day loss since September 17, 2001, when the Dow Jones lost 684 points (7.1%) after reopening in the wake of the 9/11 terrorist attacks. This drop is not thought to be entirely due to Greenspan's recent comment, whose opinion is nonetheless substantially influential.Fact|date=November 2007

He has written his memoir, titled "", published September 17, 2007. [ [http://www.washingtonpost.com/wp-dyn/content/article/2006/11/06/AR2006110600588.html Greenspan Unconcerned About Housing - washingtonpost.com ] ] Greenspan says that he wrote this book in longhand mostly while soaking in the bathtub, a habit he regularly employs ever since an accident in 1971, when he injured his back.cite news | url=http://www.usatoday.com/money/books/2007-09-17-greenspan-cover_N.htm | title=Greenspan takes center stage in 'Age of Turbulence' | author=Barbara Hagenbaugh | publisher=USA TODAY |date=2007-09-17 | accessdate=2007-11-09] . Greenspan discusses in his book, among other things, his history in government and economics, capitalism and other modes of economies, current issues in the global economy, and future issues that face the global economy. In the book Greenspan criticizes President George W. Bush, Vice President Dick Cheney, and the Republican-controlled Congress for abandoning the Republican Party's principles on spending and deficits. Greenspan's criticisms of President Bush include his refusal to veto spending bills, sending the country into increasingly deep deficits, and for "putting political imperatives ahead of sound economic policies". cite news | url=http://www.reuters.com/article/wtMostRead/idUKN1420623220070915 | title=Greenspan criticizes Bush policies in memoir | author=Mark Felsenthal | publisher=Reuters |date=2007-09-15 | accessdate=2007-11-09] Greenspan writes, "They swapped principle for power. They ended up with neither. They deserved to lose [the 2006 election] ”. cite news | url=http://online.wsj.com/article/SB118978549183327730.html | title=Greenspan Book Criticizes Bush and Republicans: 'They Deserved to Lose' | author= GREG IP and EMILY STEEL | publisher=Wall Street Journal |date=2007-09-15 | accessdate=2007-11-09] Of all the presidents with whom he worked, he praises Bill Clinton above all others, saying that Clinton maintained “a consistent, disciplined focus on long-term economic growth.”cite news | url=http://www.nytimes.com/2007/09/15/business/15greenspan.html | title=Former Fed Chief Attacks Bush on Fiscal Role | author= EDMUND L. ANDREWS | co-author=DAVID E. SANGER | publisher=The New York Times |date=2007-09-15 | accessdate=2007-11-08] Although he respected what he saw as Richard Nixon's immense intelligence, Greenspan found him to be the most profane, bigoted, and disturbed president to work with.Fact|date=November 2007 He said of Gerald Ford that he "was as close to normal as you get in a president, but he was never elected."

Greenspan's role in causing the housing bubble

In the wake of the subprime mortgage and credit crisis in 2007, Greenspan admitted that there was a bubble in the US housing market, warning in 2007 of "large double digit declines" in home values "larger than most people expect."cite news | title=Greenspan alert on US house prices |date=17 September 2007 | publisher=Financial Times | url=http://www.ft.com/cms/s/0/31207860-647f-11dc-90ea-0000779fd2ac.html ] However, Greenspan also noted, “I really didn't get it until very late in 2005 and 2006.”cite news | title=Greenspan says didn't see subprime storm brewing |date=13 September 2007 | publisher=Reuters | url=http://biz.yahoo.com/rb/070913/usa_economy_greenspan.html?.v=4 ]

Greenspan admitted that the housing bubble was “fundamentally engendered by the decline in real long-term interest rates”,cite news | last=Greenspan | first=Alan | title=A global outlook | publisher=Financial Times|date=16 September 2007 | url=http://www.ft.com/cms/s/0/976b7442-6486-11dc-90ea-0000779fd2ac.html ] though he also claims that long-term interest rates are beyond the control of central banks because "the market value of global long-term securities is approaching $100 trillion" and thus these and other asset markets are large enough that they "now swamp the resources of central banks."cite news | last=Greenspan | first=Alan | title=The Roots of the Mortgage Crisis: Bubbles cannot be safely defused by monetary policy before the speculative fever breaks on its own | publisher=Wall Street Journal|date=2007-12-12 | url=http://opinionjournal.com/editorial/feature.html?id=110010981]

Following the September 11, 2001 attacks, the Federal Open Market Committee voted to reduce the federal funds rate from 3.5% to 3.0%. [http://www.federalreserve.gov/boarddocs/hh/2002/February/FullReport.txt] Then, after the accounting scandals of 2002, the Fed dropped the federal funds rate from then current 1.25% to 1.00%. [http://www.house.gov/jec/hearings/11-13-02.pdf Hearingbefore the Joint Economic Committee Congress of the United States] , November 13, 2002. Accessed July 15, 2008.] Greenspan acknowledged that this drop in rates would have the effect of leading to a surge in home sales and refinancing. :Besides sustaining the demand for new construction, mortgage markets have also been a powerful stabilizing force over the past two years of economic distress by facilitating the extraction of some of the equity that homeowners have built up over the years.However, Greenspan's policies of adjusting interest rates to historic lows contributed to a housing bubble in the US. The Federal Reserve acknowledges the connection between lower interest rates, higher home values, and the increased liquidity the higher home values bring to the overall economy.:Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission. —Board of Governors of the Federal Reserve System, September 2005. [ [http://www.federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf Microsoft Word - ifdp 841.doc ] ] In a speech in February 2004, [http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/] Greenspan suggested that more homeowners should consider taking out Adjustable Rate Mortgages (ARMs) where the interest rate adjusts itself to the current interest in the market. [ [http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm] .] The fed own funds rate was at an all-time-low of 1%. A few months after his recommendation, Greenspan began raising interest rate, in a series of rate hikes that would bring the funds rate to 5.25% about two years later. [ [http://www.atlanticfreepress.com/content/view/768/81/] .] A triggering factor in the 2007 subprime mortgage financial crisis is believed to be the many subprime ARMs that reset at much higher interest rates than what the borrower paid during the first few years of the mortgage.

In 2008, Greenspan expressed great frustration that his 23 February 2004 speech was used to criticize him on ARMs and the subprime mortgage crisis, and stated that he had made countervailing comments eight days after it that praised traditional fixed-rate mortgages. [cite news | last = Ip | first = Greg | title = His Legacy Tarnished,Greenspan Goes on Defensive | pages = A1 | publisher = The Wall Street Journal | url = http://online.wsj.com/article/SB120760341392296107.html | accessdate = 2008-04-08]

In that speech on February 23, 2004, Greenspan had suggested that lenders should offer to home purchasers a greater variety of "mortgage product alternatives" other than traditional fixed-rate mortgages. [ [http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/default.htm FRB: Speech, Greenspan-Understanding household debt obligations-February 23, 2004 ] ] Greenspan also praised the rise of the subprime mortgage industry and the tools with which it uses to assess credit-worthiness in an April 2005 speech::Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country … With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. … Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s. ["Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country … With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s." cite news |title=Remarks by Chairman Alan Greenspan, Consumer Finance At the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. | author=Alan Greenspan | publisher=Federal Reserve Board |date=4 April 2005 | url=http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm ]

The subprime mortgage industry collapsed in March 2007, with many of the largest lenders filing for bankruptcy protection in the face of spiraling foreclosure rates. For these reasons, Greenspan has been criticized for his role in the rise of the housing bubble and the subsequent problems in the mortgage industry, ["In early 2004, he urged homeowners to shift from fixed to floating rate mortgages, and in early 2005, he extolled the virtues of sub-prime borrowing—the extension of credit to unworthy borrowers. Far from the heartless central banker that is supposed to “take the punchbowl away just when the party is getting good,” Alan Greenspan turned into an unabashed cheerleader for the excesses of an increasingly asset-dependent U.S. economy. I fear history will not judge the Maestro's legacy kindly." cite news |title=The Great Unraveling | author=Stephen Roach | publisher=Morgan Stanley |date=16 March 2007 | url=http://www.morganstanley.com/views/gef/archive/2007/20070316-Fri.html ] ["Greenspan allowed the tech bubble to fester by first warning about irrational exuberance and then doing nothing about via either monetary policy or, better, proper regulation of the financial system while at the same time becoming the “cheerleader of the new economy”. And Greenspan/Bernanke allowed the housing bubble to develop in three ways of increasing importance: first, easy Fed Funds policy (but this was a minor role); second, being asleep at the wheel (together with all the banking regulators) in regulating housing lending; third, by becoming the cheerleaders of the monstrosities that were going under the name of “financial innovations” of housing finance. Specifically, Greenspan explicitly supported in public speeches the development and growth of the risky option ARMs and other exotic mortgage innovations that allowed the subprime and near-prime toxic waste to mushroom." cite news |title=Who is to Blame for the Mortgage Carnage and Coming Financial Disaster? Unregulated Free Market Fundamentalism Zealotry | author=Nouriel Roubini | publisher=RGE Monitor |date=19 March 2007 | url=http://www.rgemonitor.com/blog/roubini/184125 ] as well as "engineering" the housing bubble itself::It was the Federal Reserve-engineered decline in rates that inflated the housing bubble … the most troublesome aspect of the price runup is that many recent buyers are squeezing into houses that they can barely afford by taking advantage of the lower rates available from adjustable-rate mortgages. That leaves them fully exposed to rising rates. —"BusinessWeek", July 19, 2004, Is A Housing Bubble About To Burst? [ [http://www.businessweek.com/magazine/content/04_29/b3892064_mz011.htm BW Online | July 19, 2004 | Is A Housing Bubble About To Burst? ] ]

Controversy

On March 17, 2008 Alan Greenspan wrote an article for the "Financial Times"' Economists’ Forum entitled “We will never have a perfect model of risk“, in which he argued: “We will never be able to anticipate all discontinuities in financial markets.” He concluded: “It is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.” [ [http://www.ft.com/cms/s/0/edbdbcf6-f360-11dc-b6bc-0000779fd2ac.html FT.com / Comment & analysis / Comment - We will never have a perfect model of risk ] ]

The article attracted a number of critical responses from forum contributors, which consists of some of the world’s leading economists (including two Nobel Memorial Prize in Economic Sciences winners, Edmund Phelps and Joseph Stiglitz), who, finding causation between Greenspan's policies and the discontinuities in financial markets that followed, criticized Greenspan mainly for what many believed to be his unbalanced and immovable ideological suppositions about global capitalism and free competitive markets. For example, one forum contributor, Paul de Grauwe, wrote: “Greenspan’s article is a smokescreen to hide his own responsibility in making the financial crisis possible. Greenspan, who was at the helm of the most important monetary institution in the world, failed to take his responsibility to supervise the financial markets blinded as he, and his colleagues, were by a belief that markets and bankers know better than governments.” Other notable critics included J. Bradford DeLong, Alice Rivlin, Richard Werner, Christopher Whalen, Michael Hudson, and Willem Buiter. [ [http://blogs.ft.com/wolfforum/2008/03/we-will-never-have-a-perfect-model-of-risk/ FT.com | The Economists’ Forum | We will never have a perfect model of risk ] ]

On April 6, Greenspan responded to his critics in a follow-up article entitled, “A response to my critics,” in which he rigorously defended his ideology as applied to his conceptual and policy framework, which, among other things, prohibited him from exerting real pressure against the burgeoning housing bubble or, in his words, "leaning against the wind," (which became a catchphrase used during the discussion). Greenspan argued, "My view of the range of dispersion of outcomes has been shaken, but not my judgment that free competitive markets are by far the unrivaled way to organize economies." He concluded: "We have tried regulation ranging from heavy to central planning. None meaningfully worked. Do we wish to retest the evidence?" [ [http://blogs.ft.com/wolfforum/2008/04/alan-greenspan-a-response-to-my-critics/#more-124 FT.com | The Economists’ Forum | Alan Greenspan: A response to my critics ] ]

On April 9, the "Financial Times" associate editor and chief economics commentator, Martin Wolf responded to the discussion with an article entitled, “Why Greenspan does not bear most of the blame,” defending Greenspan primarily as a scapegoat for the market turmoil. Several notable contributors in defense of Greenspan included Stephen Roach, Allan Meltzer, and Robert Brusca. [ [http://www.ft.com/cms/s/0/6c50fef0-056a-11dd-a9e0-0000779fd2ac.html FT.com / Columnists / Martin Wolf - Why Greenspan does not bear most of the blame ] ]

Criticism

Charges of politicization

Greenspan describes himself as a “lifelong Libertarian Republican”. [ Greg Ip and Emily Steel, [http://online.wsj.com/article/SB118978549183327730.html Greenspan Book Criticizes Bush And Republicans] , Wall Street Journal, September 15, 2007.] On March 3, 2005, Democratic Senate Minority Leader Harry Reid attacked Greenspan as “one of the biggest political hacks we have here in Washington” [ [http://www.washtimes.com/national/20050304-102717-1490r.htm Washington Times - Reid sticks by Greenspan comments ] ] and criticized him for supporting Bush's 2001 tax cut plan. [cite news | url=http://www.nytimes.com/2005/03/03/politics/03deficit.html?_r=1&pagewanted=2&oref=slogin | title=Greenspan says Federal Budget Deficits are Unsustainable | author=Edmund L. Andrews | publisher=The New York Times |date=2007-03-03|accessdate=2007-12-01] Greenspan has also received criticism from Democratic Congressman Barney Frank and others for his support of Bush's plan to phase out Social Security in favor of private accounts. [ [http://www.truthout.org/cgi-bin/artman/exec/view.cgi/38/9097 Paul Krugman | Three-Card Maestro ] ] [ [http://www.foxnews.com/story/0,2933,147972,00.html FOXNews.com - Greenspan Supports 'Ownership' Concept in Social Security - Business And Money | Business News | Financial News ] ] [ [http://www.washingtonpost.com/wp-dyn/articles/A5396-2005Mar3.html Senate Democratic Leader Blasts Greenspan (washingtonpost.com) ] ] Greenspan had said Bush's model has "the seeds of developing full funding by its very nature. As I've said before, I've always supported moves to full funding in the context of a private account." [ [http://seniorjournal.com/NEWS/SocialSecurity/5-02-16GreenspanSays.htm Greenspan Likes Social Security Private Accounts, But Urges Caution ] ]

Economist Paul Krugman, a frequent Greenspan critic, wrote in the "New York Times" that Greenspan was a “three-card maestro” with a “lack of sincerity” who, “by repeatedly shilling for whatever the Bush administration wants, has betrayed the trust placed in the Fed chairman”. [cite news | url=http://www.nytimes.com/2005/02/18/opinion/18krugman.html?_r=1&oref=slogin | title=Three-card Maestro | author=Paul Krugman | publisher=The New York Times |date=2005-02-18|accessdate=2007-11-10]

Charges that Greenspan was veering beyond the Fed's purview of monetary policy into fiscal and political matters traditionally left to lawmakers became more prevalent, coming for example from sources such as Republican Senator Jim Bunning who voted against reconfirming him. [ [http://quote.bloomberg.com/apps/news?pid=10000087&sid=aRR5whQ7nGvE&refer=top_world_news Bloomberg.com: Top Worldwide ] ] Then-Democratic House Minority Leader Nancy Pelosi stated in 2005 there were serious questions about the Fed's independence as a result of Greenspan's public statements. [ [http://www.foxnews.com/story/0,2933,149556,00.html FOXNews.com - Transcript: Nancy Pelosi on 'FOX News Sunday' - FOX News Sunday | Chris Wallace ] ] But others like Republican Senator Mitch McConnell disagreed, stating that Greenspan “has been an independent player at the Fed for a long time under both parties and made an enormous positive contribution”. [ [http://www.truthout.org/cgi-bin/artman/exec/view.cgi/37/9453 Greenspan under Fire for Support of Tax Cuts ] ] Furthermore, Greenspan had used his position as Fed Chairman to comment upon fiscal policy as early as 1993, when he supported President Clinton's deficit reduction plan, which included tax hikes and budget cuts. [cite book | author=Bob Woodward | title=Maestro: Alan Greenspan and the American Boom | publisher=Simon & Schuster | year=2001 | id=ISBN 0-7432-0412-3, page 110]

Greenspan and Objectivism

Greenspan was initially a logical positivist [Greenspan, A., "The Age of Turbulence, 2007"] but was converted to Objectivism by Nathaniel Branden. During the 1950s and 1960s Greenspan was a proponent of Ayn Rand's philosophy, writing articles for Objectivist newsletters and contributing several essays for Rand's 1966 book "" including an essay supporting the gold standard. [cite web | url = http://www.usagold.com/gildedopinion/Greenspan.html | last = Greenspan | first = Alan | title = Gold and Economic Freedom | accessdate = 2007-07-25] [cite news
first = Harriet
last = Rubin
title = Ayn Rand’s Literature of Capitalism
url = http://www.nytimes.com/2007/09/15/business/15atlas.html
publisher = The New York Times
date=2007-09-15
accessdate = 2008-01-05
]

During the 1950s, Greenspan was one of the members of Ayn Rand's inner circle, the Ayn Rand Collective, who read Atlas Shrugged while it was being written. Rand nicknamed Greenspan "the undertaker" because of his penchant for dark clothing and reserved demeanor. Although Greenspan continues to advocate laissez-faire capitalism, some Objectivists find his support for a gold standard somewhat incongruous or dubious, given the Federal Reserve's role in America's fiat money system and endogenous inflation. He has come under criticism from Harry Binswanger, [cite web | url = http://www.capmag.com/article.asp?id=1825 | accessdate = 2007-07-25 | title = Greenspan on "Infectious Greed" ] who believes his actions while at work for the Federal Reserve and his publicly expressed opinions on other issues show abandonment of Objectivist and free market principles. However, when questioned in relation to this, he has said that in a democratic society individuals have to make compromises with each other over conflicting ideas of how money should be handled. He said he himself had to make such compromises, because he actually believes that “we did extremely well” without a central bank and with a gold standard. [Alan Greenspan on FOX Business Network 10/15/07 [http://youtube.com/watch?v=ZjMQG3qUFKo] ] Greenspan and Rand maintained a close relationship until her death in 1982.

ee also

* Greenspan put
* List of United States political appointments that crossed party lines

References

Further reading

*cite book | last=Greenspan | first=Alan |title=The Age of Turbulence | publisher=Penguin Press | year=2007 | id=ISBN 1-5942-0131-5
*cite book| last =Batra| first =R| authorlink =Ravi Batra| coauthors =| title =Greenspan's Fraud: How Two Decades of His Policies Have Undermined the Global Economy| publisher =Palgrave Macmillan|year=2005| location =New York| pages =| url =| doi =| id = [http://worldcat.org/isbn/1403968594 OCLC: 57169884] | isbn = 1403968594
*cite book| last =Martin| first =J| authorlink =| coauthors =| title =Greenspan: The Man behind Money| publisher =Perseus |year=2000| location =Cambridge, Mass| pages =| url =| doi =| id = [http://www.worldcat.org/oclc/45188865&referer=brief_results OCLC: 45188865] | isbn =0738202754
*cite book | last=Tuccille | first=Jerome | title=Alan Shrugged: Alan Greenspan, the World's Most Powerful Banker | publisher=Wiley | year=2002 | id=ISBN 0-471-39906-X
*"The Economist" (October 15–21, 2005 issue) page 29, "After Alan" Verify source|date=November 2007
*cite book | last=Fleckenstein | first=William |title=Greenspan's Bubbles| publisher=McGraw-Hill | year=2008 | id=ISBN 007159158-3
*cite book | last=Woodward | first=Bob |title=Maestro: Greenspan's Fed and the American Boom | publisher=Touchstone | year=2000 | id=ISBN 0-7432-0412-30-7432-0562-6

External links

* [http://video.marketwatch.com/market/business/finance/economists/alan-greenspan.htm?cpg=1 Alan Greenspan Video and Audio on MarketWatch]
* [http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/the_tls/article3073738.ece "The Greenspan years"] : an article in the [http://www.the-tls.co.uk TLS] by Robert B. Reich, December 19 2007
* [http://www.federalreserve.gov/BOARDDOCS/SPEECHES/19961205.htm 1996 speech by Greenspan about the challenges of central banking]
* [http://www.federalreserve.gov/BoardDocs/speeches/2003/20030404/default.htm 2003 speech by Greenspan about "Market Economies and Rule of Law"]
* [http://www.stocksandnews.com/searchresults.asp?Id=435 Educate Yourself-Greenspan --The Chairman...through the years]
* [http://www.newsmeat.com/washington_political_donations/Alan_Greenspan.php Alan Greenspan's political donations]
* [http://news.bbc.co.uk/1/hi/business/4188716.stm Greenspan Warns on Protectionism, BBC News, 26 August 2005]
* [http://www.polyconomics.com/searchbase/06-12-98.html Criticism of Antitrust]
* See [http://www.time.com/time/magazine/article/0,9171,1663840,00.html analysis of Greenspan] featured on Time.com
*Sept 24 2007 - Greenspan and Naomi Klein on Democracy Now: [http://www.democracynow.org/article.pl?sid=07/09/24/1412226 on the Iraq War, Tax Cuts, Economic Populism]
*Oct 17 2007 - economist Paul Krugman [http://www.democracynow.org/article.pl?sid=07/10/17/1352236 responds] to the Sept 24 Democracy Now interview
* [http://www.telegraph.co.uk/money/main.jhtml?xml=/money/exclusions/hubpages/greenspan/greenspan.xml Alan Greenspan] Memoirs in the Telegraph

Interviews

* [http://www.charlierose.com/shows/2007/09/20/1/a-conversation-with-alan-greenspan Alan Greenspan interview on Charlie Rose Show - 53 mins video]

Criticism

*Stephen S. Roach (2005). [http://www.morganstanley.com/GEFdata/digests/20050425-mon.html Morgan Stanley Global Economic Forum: Original Sin] . See also James Wolcott's [http://jameswolcott.com/archives/2005/04/bubble_trouble.php comments] .
* [http://www.fleckensteincapital.com/old_raps/friend_or_foe.htm Fleck on Greenspan]
* [http://www.mises.org/econsense/ch83.asp Making Economic Sense - Chapter 83]
*From Objectivists: [http://www.capmag.com/article.asp?id=1821] , [http://www.capmag.com/article.asp?id=289] , [http://www.capmag.com/article.asp?id=1825] , [http://www.capmag.com/article.asp?id=856] , [http://www.capmag.com/article.asp?id=283] , [http://www.capmag.com/article.asp?id=19]
*From Richard Salsman - [http://www.intermarketforecasting.com/Greenspans%20Track%20Record%201.31.pdf Greenspan's Record: Better Than Predecessors, Not As Good as Gold]
*Doug Noland. [http://www.safehaven.com/article-3684.htm The Greenspan Era: Lessons to be Learned] , August 27, 2005.
* [http://www.commondreams.org/views04/0227-09.htm Alan Greenspan Has Got to Go]
* [http://www.barefootsworld.net/fs_m_biog.html Secrets of the Federal Reserve]
* [http://realestaterecord.blogspot.com/2007/08/alan-greenspan.html Housing Bubble Hall of Shame]
* [http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html NYT article:Taking Hard New Look at a Greenspan Legacy]


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