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Tributes to former Federal Reserve chair Alan Greenspan poured in after the news of his death early Monday, many from former colleagues and market players who had a front-row seat during his 18-year tenure atop the US central bank.<\/p>\n
Several described him as a driving force for change at the Fed and a guiding light for investors \u2013 in his own inscrutable way \u2013 even as his ultimate legacy is clouded by the 2008-09 global financial crisis.<\/p>\n
Policymakers and staffers who worked with Greenspan noted how his tenure spanned a period of significant economic change, from an era of high inflation to an economy powered by technology. Greenspan led the Fed from 1987 until 2006 and died on Monday at his home in Washington.<\/p>\n
His former colleagues credit him for ensuring the central bank remained laser-focused on inflation, spotting the impact of a productivity boom in the 1990s and shaking up how the Fed communicates.<\/p>\n
Read: Alan Greenspan, who led Fed during boom before 2008 bust, dies at 100<\/p>\n
\u201cHe was a great central banker,\u201d former chair Ben Bernanke said in emailed remarks. \u201cWe are still learning from him, even if he is no longer with us.\u201d<\/p>\n
Greenspan first made his mark by focusing on inflation, doubling down on the aggressive policy stance taken by his predecessor Paul Volcker.<\/p>\n
\u201cWhen Paul Volcker broke the back of double-digit inflation in the early 1980s, he left Alan Greenspan with a 4% inflation rate,\u201d said Charles Evans, president of the Chicago Fed from 2007 to 2023. \u201cUnder Greenspan\u2019s leadership, inflation was both deliberately and opportunistically reduced to 2%, and lower by the early 2000s.\u201d<\/p>\n
Others credited Greenspan for transforming the way the Fed spoke to the public. In February 1994, the Fed\u2019s rate-setting committee for the first time issued a statement following a policy meeting with the basic details of its decision.<\/p>\n
Among professional investors, Greenspan is fondly remembered for the prosperous years for financial markets under his stewardship. The S&P 500 Index of US stocks nearly quadrupled during those years, delivering an annual return above 10%.<\/p>\n
\u201cPeople would joke on Wall Street in the 1990s and early 2000s that if he ever passed away while in charge of the Fed, they\u2019d have to stuff a dummy, put it in a chair and claim he was still chairman to keep financial markets confident,\u201d said Jeremy Siegel, emeritus finance professor at University of Pennsylvania.<\/p>\n
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CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Beginning with the October 1987 stocks crash, Greenspan showed he was willing to step in to inject liquidity and defend markets, leading to what investors called \u201cthe Greenspan put.\u201d<\/p>\n
\u201cWhen you have a financial crisis, as we did in 1987 in the stock market, his reaction was appropriate,\u201d said Ed Yardeni of Yardeni Research. \u201cBut he did create a legacy of the Fed helping Wall Street whenever it got into trouble.\u201d<\/p>\n
Greenspan was also willing occasionally to restrain financial markets, leading to one of his signature moments.<\/p>\n
Tucked into a speech one evening in December 1996, the Fed chairman asked: \u201cHow do we know when irrational exuberance has unduly escalated asset values?\u201d<\/p>\n
A Fed staffer who handed the text to members of the media told journalists it didn\u2019t include anything particularly noteworthy, and some reporters skipped the key line in their initial reports. But the stories that did include it caused an immediate ripple in Asian markets.<\/p>\n
\u201cHe took a tremendous amount of criticism from people in the market who thought he overstepped his bounds,\u201d Charles Lieberman, co-founder and chief investment officer at Advisors Capital Management, said Monday on Bloomberg Surveillance<\/em>.<\/p>\n Today, the phrase resurfaces as a kind of tribute to Greenspan every time a market begins to look frothy.<\/p>\n \u201c\u2018How do we know when irrational exuberance has unduly escalated asset values?\u2019 Turns out we didn\u2019t, and his query serves as good advice in today\u2019s markets,\u201d said Bill Gross, co-founder and former chief investment officer of Pacific Investment Management Co.<\/p>\n Greenspan reached another crucial stage in his tenure during the 1990s as companies rapidly adopted new technology at the outset of the Internet age. As the economy picked up, he argued a resulting productivity boom would prevent an inflation spike, and refrained from raising interest rates.<\/p>\n \u201cIt\u2019s rather remarkable how Greenspan came to the recognition that an easier policy was possible,\u201d said David Wilcox of Bloomberg Economics, who worked as a staff economist under Greenspan. \u201cRealising that the productivity data at the time weren\u2019t credible, he dug in, working with one of the senior staffers to build the empirical evidence that productivity growth was much stronger than the official statistics showed.\u201d<\/p>\n ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n Greenspan often took cues on how the economy was performing from unexpected places, according to famed investor Stanley Druckenmiller, who met the former central banker while serving on the Treasury Borrowing Advisory Committee.<\/p>\n \u201cThe great thing about Greenspan was he loved the models and he could go toe-to-toe with anybody on the details in terms of rigorous thinking,\u201d Druckenmiller said. \u201cBut he was also interested in talking to businessmen on real-time information and what was going on with orders in the economy that was outside the model.\u201d<\/p>\n Yet, the eruption of the credit crunch in 2007 that later morphed into a near-global financial collapse in 2008 has marred Greenspan\u2019s legacy.<\/p>\n While Greenspan was lauded as he left office in 2006, critics say he missed the build-up of a housing bubble that ultimately caused the worst economic downturn since the Great Depression.<\/p>\n Among the criticism is Greenspan\u2019s view that the markets should run their course and the Fed could quickly clean up after.<\/p>\n \u201cHe made that trade-off to say, \u2018Let\u2019s have many, many years of growth and take perhaps a little bit more of a risk of some of that downside,\u2019\u201d \u00a0Randall Kroszner, an economics professor at the University of Chicago and a Fed Governor from 2006 to 2009,\u201d told Bloomberg TV. \u201cWe did try to clean some of that up, but it probably had a bigger, bigger cost than I think he would have anticipated.\u201d<\/p>\n While criticism is merited, Greenspan was only one piece of a much bigger regulatory and policy jigsaw, said Don Kohn, a former vice chair at the central bank.<\/p>\n \u201cIt\u2019s true that he didn\u2019t raise a flag and say \u2018something bad is happening here, we need to do something,\u2019 but at the same time, his authority to do something, even if he had raised that flag, would have been quite limited,\u201d Kohn said.<\/p>\n Others remembered him for his mastery of economic data and his ability, despite his obsession with the minutiae, to see a larger economic picture.<\/p>\n \u201cI remember him at board briefings \u2013 he would be toe-to-toe with all of our experts on the real side of the economy on the most minute, detailed things,\u201d recalled James Clouse, an economist at the Andersen Institute who worked for at the Fed for more than three decades. \u201cHe really knew the data at an extraordinary level and could accurately discuss all those details with the board staff, and at the same time he had this incredibly broad perspective.\u201d<\/p>\n \u00a9 2026 Bloomberg<\/p>\n<\/p><\/div>\n #Greenspans #legacy #irrational #exuberance #crisis<\/p>\n","protected":false},"excerpt":{"rendered":" Tributes to former Federal Reserve chair Alan Greenspan poured in after the news of his death early Monday, many from former colleagues and market players who had a front-row seat… 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Call<\/span><\/h3>\n
The Shadow of Crisis<\/span><\/h3>\n