Alan Greenspan, the economist who guided the Federal Reserve through nearly two decades of American prosperity and became a rare celebrity among central bankers, died Monday at his home in Washington. He was 100.
His wife, NBC news anchor Andrea Mitchell, announced his death in a statement. The couple had become a Washington power fixture, prompting comedian Jay Leno to joke during a White House Correspondents Association dinner that Mitchell, not then-First Lady Hillary Clinton, was married to "the most powerful man in the world."
Greenspan's tenure at the Federal Reserve, which began in 1987 and spanned four presidential administrations, coincided with some of the longest economic expansions in United States history. During the 1990s, when stock market coverage became ubiquitous and ordinary Americans closely followed financial news, Greenspan achieved an unusual level of fame for a central banker. His pronouncements could move markets, and his cryptic communication style became known as "Fedspeak."
Greenspan later acknowledged that he would deliberately garble his syntax to avoid saying anything that might move financial markets. Yet one notable exception came in 1996, when he posed a question during a speech at the American Enterprise Institute that would reverberate through global markets: "How do we know when irrational exuberance has unduly escalated asset prices." The warning sent temporary shivers through stock exchanges worldwide, though his own reputation continued to soar.
A Musician Turned Economic Maestro
Before becoming synonymous with monetary policy, Greenspan was a talented jazz musician who studied clarinet and saxophone at Juilliard. He also liked to write speeches in the bathtub, a quirk that contrasted with the formal gravity of his public persona.
His economic philosophy was shaped significantly by novelist Ayn Rand. Greenspan had been a member of Rand's inner circle and contributed chapters to her book, Capitalism: The Unknown Ideal. When Greenspan joined the Ford administration as an economic adviser, Rand attended his swearing-in ceremony.
"Greenspan said that Ayn Rand put the moral foundation under capitalism for him," said Anne Heller, Rand's biographer, speaking to NPR.
Breaking With Tradition on Unemployment
As a master of monetary policy, Greenspan distinguished himself by breaking with central banking orthodoxy. Traditionally, central bankers respond to low unemployment by raising interest rates to prevent inflation. Greenspan took a different approach, keeping borrowing costs low even as unemployment fell to historic lows.
"He was willing to watch and wait as the unemployment rate drifted lower and lower and lower and lower, and we still had no inflation," recalled Alan Blinder, a Princeton economist who served under Greenspan on the Federal Reserve's governing board, speaking to NPR.
The gamble paid off, and the economy experienced a decade-long boom. However, critics argue that his easy-money policies helped inflate the dot-com bubble and later fueled the subprime mortgage crisis that devastated the global economy.
A Tarnished Legacy
Greenspan's reputation, lionized during the prosperity of the 1990s, suffered significant damage following the global financial crisis of 2008. His libertarian approach to regulation meant he refused to use the Federal Reserve's powers to crack down on risky lending practices. He believed bankers' self-interest would prevent them from taking undue risks, making heavy-handed regulation unnecessary.
Two years after leaving the Federal Reserve, Greenspan admitted to a congressional committee investigating the financial meltdown that his faith in market self-regulation had been misplaced. "I was shocked because I had going for 40 years or more with very considerable evidence that it was working exceptionally well," he told the committee, speaking to NPR.
The admission represented a profound reversal for someone whose entire career had been built on faith in free markets. Economist Vincent Reinhart noted the significance of the acknowledgment: "For Alan Greenspan to say, 'Well, maybe markets don't always get it right,' is a reflection on his entire career, not just his tenure at the Fed," Reinhart told NPR.
Greenspan's regulatory philosophy had been tested before. In the 1980s, as a private economist, he provided a testimonial for what he called "seasoned and expert" management at Lincoln Savings and Loan in an effort to ward off regulation. Lincoln later collapsed, costing taxpayers billions of dollars, and its boss, Charles Keating, went to prison for fraud.
Greenspan's legacy remains complex and contested. He will be remembered as both a maestro of monetary policy who presided over historic economic growth and as a reluctant regulator whose light touch contributed to financial catastrophe. His career embodied the boom he fostered and the bust he failed to prevent, leaving an indelible mark on American economic history that continues to shape policy debates today.
