By Denny Gulino
WASHINGTON (MaceNews) – For any reporter covering Alan Greenspan there was a reliable imperative, read the text of his latest speech very closely because there was likely a zinger in there, a sentence that he intended to be the quote of the day, whether “irrational exuberance” or the ‘winner-take-all economy.”
It was not for nothing he earned the monicker “The Maestro,” for not only the nuggets he inserted in his speeches but for his behind-the-scenes confidential briefings for chosen reporters that he intended to color coverage of the Fed. When one reporter violated the confidentiality, he was banned from Fed relations from then on. At the same time he was allergic to TV interviews.
His famously damp legal pads on which he wrote his speeches while soaking in the bathtub were a challenge for his staff. He thought the warm waters boosted his already considerable IQ.
He brought to his Fed leadership a reverence for data of which he was a voracious consumer – and also an originator, extracting insights from raw numbers and observations that became received wisdom. Computerization’s boost to heretofore undocumented productivity in his eyes, for instance, led the Fed to postpone rate hikes. Seeing the global reach of the housing boom added perspective to the era of low, low interest rates.
Having outgrown his early fascination with Ayn Rand’s Objectivism as part of her inner circle, she was nevertheless remained a friend, at his side when sworn in as CEA chair and until her death.
His father Herbert had been s stockbroker and consultancy grew to be son Alan’s profession, but not until after his passion for the clarinet and saxophone post Juillliard,. He was a good enough musician to rub shoulders with some jazz greats. It was in the Woody Herman band he played with Leonard Garment, to become President Nixon’s special counsel. After his Ph.D. from NYU and the establishment of Townsend-Greenspan & Co. he was to become chair of the Council of Economic Advisers in the Ford administration. His firm grounding in many boardrooms backgrounded his real-world grasp of the economy and how it actually worked.
Succeeding Paul Volcker, he quickly took the reins, steadying the markets as he affirmed the Fed’s role as a ‘source of liquidity to support the economic and financial system.” After the Twin Towers fell, he led the consensus to bring the fed funds rate down to 1%. His critics were legion but his admirers were greater still. When Saddam Hussein still ruled Iraq Greenspan feared he could close the Strait of Hormuz, wreaking chaos on the world economy. Presidents Reagan, H.W. Bush and Clinton kept him in his Fed post.
After being succeeded by Ben Bernanke he was sought after for his insights as head of Greenspan Associates LLC, summoned to testify on Capitol Hill and make notable appearances, even seeing the possibility of an oncoming recession at one point. He argued against the national vulnerability of the housing market, missing the part subprime mortgages were to play. Following his pessimism expressed on Feb 26, 2007, the DJIA the next day lost 3,3%. In another foreshadowing, he warned against cutting the H1-B visa program. and praised skilled immigration.
It was in congressional testimony he recognized the limits he had embraced of free market’s power of self correction and finally saw the value added of prudent regulation, conceding his worldview of many decades had been flawed. Evidence the economic world didn’t always work the way he thought it did, he said, left him “shocked.”