Alan Greenspan

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Alan Greenspan.

Alan Greenspan (born 6 Marc 1926) is a Jewish economist who was chairman of the Federal Reserve of the United States from 1987 to 2006.

At least previously, he was closely associated with Randian Objectivism and a friend of the also Jewish Ayn Rand. E. Ray Canterbery has chronicled Greenspan's relationship with Rand, and has argued that the influence had pernicious effects on Greenspan's monetary policy.[1]

The easy-money policies of the Fed during Greenspan's tenure have been argued to be a leading cause of the dotcom bubble, and the subprime mortgage crisis (occurring within a year of his leaving the Fed).

Life

Early life and education

Greenspan was born in the Washington Heights area of New York City. His father Herbert Greenspan was of Romanian-Jewish descent and his mother Rose Goldsmith of Hungarian-Jewish descent.

Greenspan attended George Washington High School from 1940 till he graduated in June 1943. He further studied clarinet at the Juilliard School from 1943 to 1944. In 1945 he attended New York University (NYU) and earned a B.S. in economics summa cum laude in 1948[2] and an M.A. in economics in 1950.[3] At Columbia University, under the tutelage of Arthur Burns, he pursued advanced economic studies but dropped out.[4]

In 1977, NYU awarded him a Ph.D. in economics. His dissertation is not available from NYU[5] since it was removed at Greenspan's request in 1987, when he became Chairman of the Federal Reserve Board. However, a single copy has been found, and the 'introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble'.[6]

Prior to the Federal Reserve

From 1948 to 1953, Greenspan worked as an economic analyst at The National Industrial Conference Board, a business and industry oriented think-tank in New York City.[7] From 1955 to 1987, when he was appointed as chairman of the Federal Reserve, 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[citation needed].

In the summer of 1968, Greenspan agreed to serve Richard Nixon as his coordinator on domestic policy in the nomination campaign.[8] Greenspan has also 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.[9][10] He was a director of the Council on Foreign Relations foreign policy organization between 1982 and 1988.[11] He also served as a member of the influential Washington-based financial advisory body, the Group of Thirty in 1984.

Chairman of the Federal Reserve

On June 2, 1987, President Ronald Reagan nominated 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.

Just two months after his confirmation he was faced with his first crisis—the 1987 stock market crash.

His terse statement that the Fed "affirmed today its readiness to serve as a source of liquidity to support the economic and financial system"[12][13][14] is seen by many as having been effective in helping to control the damage from that crash.

His handling of monetary policy in the run-up to the 1991 recession was criticized by the Administration as being excessively tight. The incoming Democratic president Bill Clinton reappointed Greenspan, and consulted him on economic matters. Greenspan lent support to Clinton's 1993 deficit reduction program.[15] Greenspan, while still fundamentally monetarist in orientation, had eclectic views on the economy, and his monetary policy decisions largely followed standard Taylor rule prescriptions.

A 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%.[16]

During the Asian financial crisis of 1997–1998, the Federal Reserve flooded the world with dollars, and organized a bailout of Long-Term Capital Management. Some have argued that 1997–1998 represented a monetary policy bind—as the early 1970s had represented a fiscal policy bind—and that while asset inflation had crept into the United States, demanding that the Fed tighten, the Federal Reserve needed to ease liquidity in response to the capital flight from Asia. Greenspan himself noted this when he stated that the American stock market showed signs of irrationally high valuations.

In 2000, Greenspan raised interest rates several times; these actions were believed by many to have caused the bursting of the dot-com bubble. However, according to the Economist Paul Krugman "he didn't raise interest rates to curb the market's enthusiasm; he didn't even seek to impose margin requirements on stock market investors. Instead, he waited until the bubble burst, as it did in 2000, then tried to clean up the mess afterward."[17] In autumn of 2001, as a decisive reaction to September 11 attacks and the various corporate scandals which undermined the economy, the Greenspan-led Federal Reserve initiated a series of interest cuts that brought down the Federal Funds rate to 1% in 2004. His critics, notably Steve Forbes, attributed the rapid rise in commodity prices and gold to Greenspan's loose monetary policy which he believed had caused excessive asset inflation and a weak dollar. By late 2004 the price of gold was higher than its 12-year moving average.

On May 18, 2004, Greenspan 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 Clinton.

In a May 2005 speech, Greenspan stated: "Two years ago at this conference I argued that the growing array of derivatives and the related application of more-sophisticated methods for measuring and managing risks had been key factors underlying the remarkable resilience of the banking system, which had recently shrugged off severe shocks to the economy and the financial system. At the same time, I indicated some concerns about the risks associated with derivatives, including the risks posed by concentration in certain derivatives markets, notably the over-the-counter (OTC) markets for U.S. dollar interest rate options."[18]

Greenspan's term as a member of the Board ended on January 31, 2006, and Ben Bernanke was confirmed as his successor.

As chairman of the board, Greenspan did not give any broadcast interviews from 1987 through 2005.[19]

After the Federal Reserve

Immediately upon leaving the Fed, Greenspan formed an economic consulting firm, Greenspan Associates LLC.[20] He also accepted an honorary (unpaid) position at HM Treasury in the United Kingdom.

In May 2007, Greenspan was hired as a special consultant by PIMCO to participate in Pimco’s quarterly economic forums and speak privately with the bond manager about Fed interest rate policy.[21] In August 2007, Deutsche Bank announced that it would be retaining Greenspan as a Senior Advisor to its investment banking team and clients.

In mid-January 2008, hedge fund Paulson & Co. hired Greenspan as an adviser. According to the terms of their agreement he was not to advise any other hedge fund while working for Paulson. (During 2007 Paulson had foreseen the collapse of the sub-prime housing market and hired Goldman Sachs to package their sub-prime holdings into derivatives and sell them. Some economic commentators blamed this collapse on Greenspan's policies while at the Fed.)[22][23]

On April 30, 2009, Greenspan offered a defense of the controversial H-1B visa program, telling a U.S. Senate subcommittee that the visa quota is "far too small to meet the need" and saying that it protects U.S. workers from global competition, creating a "privileged elite". Testifying on immigration reform before the Subcommittee on Immigration, Border Security and Citizenship, he said more skilled immigration was needed "as the economy copes with the forthcoming retirement wave of skilled baby boomers".[24]

Quotes

Well, first of all, the Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take. So long as that is in place and there is no evidence that the administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don't, frankly, matter. And I've had very good relationships with presidents.
—Alan Greenspan, 18 September 2007[25]

See also

External links

References

  1. ↑ Canterbery, E. Ray (2006). Alan Greenspan: The Oracle Behind the Curtain. Singapore: World Scientific.
  2. ↑ Martin, Justin (2000). Greenspan: The Man behind Money. Cambridge, Massachusetts: Perseus, 27. ISBN 0-7382-0275-4. 
  3. ↑ Greenspan 2007, p. 33.
  4. ↑ Martin, Justin (2000). Greenspan: The Man behind Money. Cambridge, Massachusetts: Perseus, 27–31. ISBN 0-7382-0275-4. 
  5. ↑ McTague, Jim (March 31, 2008). "Dr. Greenspan's Amazing Invisible Thesis". Barron's. http://online.barrons.com/article/SB120675340444773623.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_right. Retrieved October 17, 2008. 
  6. ↑ McTague, Jim (April 28, 2008). "Looking at Greenspan's Long-Lost Thesis". Barron's. http://online.barrons.com/public/article/SB120917419049046805.html?mod=mktw. Retrieved July 25, 2009. 
  7. ↑ Greenspan 2007, pp. 32–34, 41–45.
  8. ↑ (1987) Nixon. New York City: Simon & Schuster. ISBN 0-671-52837-8. OCLC 14414031. 
  9. ↑ Template:Cite press release
  10. ↑ Bloomberg News (February 1, 2000). "U.S. Senate Panel Votes for 4th Term for Fed Chairman Greenspan". Deseret News. Template:Verify source
  11. ↑ Grose, Peter (1996). "Historical Roster of Directors and Officers", Continuing the inquiry: the Council on Foreign Relations from 1921 to 1996. New York City: Council on Foreign Relations. ISBN 0-87609-192-3. OCLC 35280546. 
  12. ↑ Carlson, Mark (November 2006). "A Brief History of the 1987 Stock Market Crash with a Discussion of the Federal Reserve Response". Washington, DC: Federal Reserve Board.
  13. ↑ Tamny, John (07.02.08). In 2008, Shades of October 1987. Forbes, com. Retrieved on June 22, 2009.
  14. ↑ "Central Banks promise support". BBC News. September 12, 2001. http://news.bbc.co.uk/2/hi/business/1538304.stm. Retrieved June 22, 2009. 
  15. ↑ Chairman Moved a Nation. Washington Post.
  16. ↑ The Market Shaker. Online NewsHour (December 6, 1996). Retrieved on June 22, 2009.
  17. ↑ Krugman, Paul (2009). The return of depression economics and the crisis of 2008. W.W. Norton. ISBN 978-0-393-33780-8. , page 142
  18. ↑ FRB: Speech, Greenspan—Risk Transfer and Financial Stability (May 5, 2005). Retrieved on May 24, 2010.
  19. ↑ Davies, Sir Howard (29 December 2005). "BBC NEWS". BBC Online. http://news.bbc.co.uk/2/hi/business/4562488.stm. Retrieved 17 May 2011. 
  20. ↑ Henderson, Nell (November 7, 2006). "Greenspan Unconcerned About Housing". The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2006/11/06/AR2006110600588.html. Retrieved April 26, 2011. 
  21. ↑ "Pimco hires Greenspan as consultant: report". Reuters. May 16, 2007. http://www.reuters.com/article/ousiv/idUSN1546703720070516. Retrieved June 22, 2009. 
  22. ↑ Marketwatch.com, "Tangled webs: Greenspan, Paulson, Goldman, the SEC and C&C Music Factory", by Cody Willard. Retrieved January 15, 2011.
  23. ↑ Monaghan, Angela (January 15, 2008). "Greenspan joins hedge fund Paulson". London: Daily Telegraph. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/2782593/Greenspan-joins-hedge-fund-Paulson.html. Retrieved June 22, 2009. 
  24. ↑ Thibodeau, Patrick (April 30, 2009). "Greenspan: H-1B cap would make U.S. workers 'privileged elite'". Computerworld. http://www.computerworld.com/s/article/9132438/Greenspan_H_1B_cap_would_make_U.S._workers_privileged_elite_. Retrieved April 16, 2011. 
  25. ↑ Greenspan Examines Federal Reserve, Mortgage Crunch
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