13th Chairman of the Board of Governors of the Federal Reserve
|In office |
August 11, 1987 – January 31, 2006
|Preceded by||Paul Volcker|
|Succeeded by||Ben Bernanke|
|Born||March 6, 1926 (age 80) |
New York City
Alan Greenspan (born March 6, 1926) is an American economist and was Chairman of the Board of Governors of the Federal Reserve of the United States from 1987 to 2006. Following his retirement as Fed chairman, he accepted an honorary (unpaid) position at HM Treasury in the United Kingdom.
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, at which time he relinquished the chairmanship to Ben Bernanke. Greenspan was lauded for his handling of the Black Monday 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. However, this expansion culminated in a stock market bubble burst in March 2000 followed by a recession in 2001–2002.
From 2001 until his retirement, he was increasingly criticized for some statements seen as overstepping the Fed's traditional purview of monetary policy, and others viewed as overly supportive of the policies of President George W. Bush, as well as for policies seen as leading to a housing bubble. Greenspan was nonetheless still generally considered during that time to be the leading authority on American domestic economic and monetary policy, and his active influence continues to this day.
Greenspan was born to a Jewish family in New York, New York. He studied clarinet at Juilliard from 1943 to 1944 and is known as an accomplished saxophone player. He then attended New York University (NYU), and received a B.S. in Economics (summa cum laude) in 1948, and an M.A in Economics in 1950. After NYU, Greenspan attended Columbia University, intending to pursue advanced economic studies, but subsequently dropped out. Much later, in 1977, NYU also awarded him a Ph.D. in Economics. He did not complete a dissertation, normally required for that degree. On December 14, 2005 he was awarded an honorary Doctor of Commercial Science from NYU, his fourth degree from that institution.
Starting in 1950, Greenspan began a 20-year association with famed novelist and philosopher Ayn Rand. He wrote for Rand’s newsletters and authored a chapter in her book Capitalism: The Unknown Ideal.
Greenspan has been married to NBC television journalist Andrea Mitchell since 1997.
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, 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. 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.
During the 1950s and 1960s Greenspan was a friend of author Ayn Rand and a proponent of her Objectivist philosophy, which among other things holds that reason, egoism and capitalism are the cornerstones of a free society. He wrote articles for Objectivist newsletters, and contributed several essays for Rand's 1966 book Capitalism: the Unknown Ideal. In Capitalism: the Unknown Ideal, Greenspan wrote an essay strongly supporting the gold standard. More recently however, he has been criticised by some Objectivists for his actions.
Greenspan continues to advocate laissez-faire capitalism. Some Objectivists find his support for a gold standard somewhat of an irony given the Federal Reserve's role in America's fiat money system and endogenous inflation. He has come under heavy criticism from Objectivists, most notably Leonard Peikoff and Harry Binswanger, as they believe that working for the Federal Reserve is an abandonment of Objectivist and free market principles.
When Greenspan was sworn in as chairman of the Council of Economic Advisers, Ayn Rand attended the ceremony and met Gerald Ford. Greenspan then attended Rand's funeral in 1982.
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. His terse statement, "the Fed stands ready to provide all necessary liquidity" is seen as having been effective in controlling the damage from that crash. Another famous example of the effect of his closely-parsed comments was his December 5, 1996 remark about "irrational exuberance and unduly escalating stock prices" that led Japanese stocks to fall 3.2%.
Greenspan was famous for his ability to give technical and confusing speeches. U.S. News & World Report reported that, "Few can confuse Wall Street as thoroughly as Federal Reserve Board Chairman Alan Greenspan can."  Greenspan was sometimes so hard to understand that the Motley Fool radio show included a game called "What Did the Fed Chief Say?", where contestants were challenged to interpret snippets of Greenspan's speeches. Greenspan mocked his own speaking style in 1988 when he said, "I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I said."
On May 18, 2004, he 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.  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. He does disagree with Greenspan on the question of "inflation targeting," a practice in which the Fed makes public a projected inflation rate, effecting a greater transparency in likely Fed moves to raise or lower short-term interest rates. Inflation targeting arguably reduces certain forms of economic volatility. Bernanke is for a targeted minimum level of inflation, Greenspan against.
Greenspan's policies of adjusting interest rates to historic lows and encouraging borrowers to take out nontraditional adjustable-rate mortgages are believed to have contributed to a housing bubble in the U.S. 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.
For this reason some have criticized then Fed Chairman Alan Greenspan for "engineering" the housing bubble:
On March 3, 2005, Democratic Senate minority leader Harry Reid attacked Greenspan as "one of the biggest political hacks we have here in Washington" and criticized him for supporting Bush's 2001 tax cut plan. Greenspan also received criticism from liberal Congressman Barney Frank for his support of Bush's plan to allow workers to invest a portion of their payroll taxes into a personal retirement account.
Princeton University economist and former Enron adviser Paul Krugman wrote in the New York Times that Greenspan is 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...."
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 Senator Jim Bunning who voted against reconfirming him. House minority leader Nancy Pelosi stated there were serious questions about the Fed's independence as a result of Greenspan's public statements. But others like 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." 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.
Greenspan now works as a private advisor making speeches and providing consulting for firms through his company Greenspan Associates LLC. He is also working on a memoir