Who Is Alan Greenspan?

Who Is Alan Greenspan?

Let me introduce you to Alan Greenspan, an American economist who chaired the Board of Governors of the Federal Reserve, the U.S. central bank, from 1987 to 2006. In this position, he also led the Federal Open Market Committee, the key group that decides on interest rates and manages the money supply.

You probably know him best for guiding the economy through the Great Moderation, that stretch from the mid-1980s to 2007 marked by steady inflation and solid growth. But his legacy includes some controversies, like the easy money policies that some say helped inflate the 2000 dot-com bubble and the 2008 crisis.

Early Life and Education

Born in New York City on March 6, 1926, Greenspan earned his bachelor's, master's, and doctoral degrees in economics from New York University. He also studied at Columbia University in the early 1950s under Arthur Burns, who later became Fed Chair himself.

His career started in 1948 with a nonprofit analyzing demand for metals like steel, aluminum, and copper. From there, I can tell you he ran his own consulting firm, Townsend-Greenspan & Co., in New York from 1954 to 1974 and again from 1977 to 1987. He entered public service in 1974 as chair of the President's Council of Economic Advisers under Gerald Ford.

In 1987, President Ronald Reagan appointed him as the 13th Fed Chair, succeeding Paul Volcker. He was reappointed by Presidents George H.W. Bush, Bill Clinton, and George W. Bush, serving over 18 years until Ben Bernanke took over in 2006. Post-retirement, Greenspan wrote his memoir, The Age of Turbulence, and started Greenspan Associates LLC in Washington, D.C.

Key Challenges and Achievements

Greenspan was skilled at building consensus among Fed members and navigated major crises, like the 1987 stock market crash. Right after that, he pushed for deep interest rate cuts to avoid a depression, which helped stabilize things.

One fast fact you should know: He's the only Fed Chair to receive the Presidential Medal of Freedom, awarded by George W. Bush.

Alan Greenspan’s Policies and Actions

During his time, Greenspan oversaw a prosperous era in U.S. history, and his supporters credit his leadership for much of that. But some policies drew criticism then and now.

On inflation, he built a hawkish reputation early on, even advocating for a gold standard in his 1967 essay 'Gold and Economic Freedom.' Critics saw this as prioritizing price control over growth and jobs. Yet, as Fed Chair, he adapted; in a 1998 speech, he admitted the new economy might handle inflation better than expected.

In practice, his approach was flexible—he risked inflation to dodge depressions and kept money easier than his predecessor, Paul Volcker. In the early 2000s, he cut rates to historic lows.

Take his interest rate moves: In 2000, after the dot-com burst, he lowered rates, and again post-9/11, dropping the fed funds rate from 3.5% to 3%, then to 1% for a year. Some say this inflated asset bubbles, contributing to the housing crisis and Great Recession, though Greenspan disputes it.

He also encouraged adjustable-rate mortgages in a 2004 speech, but as rates rose, many homeowners faced higher payments, worsening the crisis.

Then there's the 'Greenspan put'—his strategy of slashing rates to prop up the economy during bubbles. This created moral hazard, encouraging risky investments because investors expected Fed bailouts, like put options limiting losses.

The Bottom Line

As with many officials, opinions on Greenspan's tenure vary. He tackled huge challenges like the 1987 crash and 9/11, and he drove strong growth in the 1990s. But debates continue on whether his actions sparked the recession that followed his exit.