Alan Greenspan, who ran the U.S. Federal Reserve for more than 18 years and was treated, for most of them, as the closest thing American capitalism had to an oracle, died on Monday at his home. He was 100. His wife, NBC News correspondent Andrea Mitchell, said the cause was complications of Parkinson’s disease.
Greenspan chaired the world’s most powerful central bank from 1987 to 2006, appointed by Ronald Reagan and reappointed by George H.W. Bush, Bill Clinton and George W. Bush, a run of bipartisan trust almost unimaginable in Washington now. By the time he stepped down, markets had crowned him the Maestro
and the Oracle.
Two years later, the financial system he had helped shape nearly collapsed, and the worship curdled into something closer to a trial.
That arc of adulation, then a reckoning he lived long enough to hear in full, is the real story of his career.
For most of his tenure the numbers made the case for him. His years at the Fed overlapped with what economists call the Great Moderation, a stretch from the mid-1980s to 2007 of low inflation, steady growth and a climbing stock market. He navigated the 1987 crash within weeks of taking the job, flooded the system with cash after it, and went on to talk the economy through the bursting of the dot-com bubble. Lawmakers and investors hung on his testimony, parsing deliberately opaque sentences for hints. He liked it that way, up to a point.
“You don’t want to surprise the markets unless there is a purpose to it.”
Alan Greenspan, Federal Reserve oral history, 2009
In December 1996, with technology stocks running hot, he asked aloud how anyone could know when irrational exuberance
had inflated asset values beyond reason. The phrase escaped the speech and became shorthand for every bubble since. It is also, in hindsight, the question his critics say he failed to answer when it mattered most.
Because the bill came due after he left. The 2008 meltdown and the Great Recession that followed arrived two years into his retirement, but plenty of economists traced the wreckage back to his desk: to the long stretch of cheap money and his faith that banks could be trusted to police their own risk. The Economist, looking back in 2017, put the indictment plainly: the main charge against him was that he was a naive believer in market efficiency, failing to pop bubbles in the late 1990s or mid-2000s and failing to regulate the financial sector properly.
Greenspan never quite accepted the verdict. As early as 2007 he was telling Fortune he was the target of revisionist history,
insisting he had flagged the dangers building in subprime mortgages. What he did concede, eventually, was a flaw in his own intellectual machinery. He had spent a career discounting human psychology as something not worth evaluating,
he said, before deciding there were very important missing variables in the forecasting system, and these all related to systemic activities of human beings.
He put it more memorably than most central bankers manage:
“You can count that human beings will become euphoric on occasion, and in deep distress and fear. What you can count on is that will never change.”
Alan Greenspan, to Fortune Magazine
It was an unusual confession from a man whose own faith in rational markets had been forged young. Born in New York City on March 6, 1926, the son of a stockbroker, Greenspan showed an early head for figures and a parallel gift for music; he studied clarinet at Juilliard before switching to economics at New York University, where he eventually took bachelor’s, master’s and doctoral degrees. Along the way he fell into the orbit of the novelist Ayn Rand, attending her Manhattan salon and absorbing a free-market conviction that would outlast nearly everyone who doubted it.
He guarded the Fed’s independence with a dry stubbornness. Asked once whether any president had ever leaned on him to cut rates, he allowed that a few had hinted, then added the line that doubles as an epitaph for the job: no politician ever called me up and asked me to raise interest rates.
His successors are still arguing with his ghost. The current chair, Kevin Warsh, has built his early tenure on the opposite reflex, prioritizing inflation over the markets’ wishes and resisting the easy-money instinct that defined the Greenspan era, with the Fed lately holding rates steady amid open internal division. The caution is, in part, a memory of what came after the long boom Greenspan presided over. He spent his last years insisting the crash was not his fault. The economics profession spent those same years deciding the question was more complicated than the Maestro ever wanted to admit — and that, perhaps, is the more honest verdict on a man who taught Washington to listen for what a central banker would not say.
