Former US Fed chairman Alan Greenspan dies at 100 after battling Parkinson’s disease

WASHINGTON - Alan Greenspan, the influential economist who steered US monetary policy during his five terms as chairman of the Federal Reserve under four presidents, died at 100, NBC news reported on June 22.

Greenspan was the head of the Federal Reserve from 1987 to 2006.

He is survived by his wife, Andrea Mitchell, 79. She is the chief Washington correspondent and chief foreign affairs correspondent for NBC News.

“Alan passed away at our home this morning at the age of 100 from complications of Parkinson’s disease,” Mitchell said in a statement.

“He was a giant of a man who helped shape the US economy for decades under presidents of both parties, but was always honest in acknowledging his mistakes.”

She added: “To me he was my husband, who shaped my life from our very first date in 1984. He had ‘irrational exuberance’ for baseball, the Washington Commanders, tennis, golf and music, especially jazz.

“He will be remembered for his brilliance and his kindness. Being his life partner was the joy of my life.”

Greenspan oversaw the second-longest economic expansion in US history, an uninterrupted decade of growth from March 1991 to March 2001. His decision to let the economy run - despite pressure to raise interest rates against an inflation threat that never materialised - helped foster years of US prosperity and earned him rock star status as an economic “maestro.”

The era was marked by his prescient judgment that a productivity surge in the mid-1990s would keep inflation contained.

His intuition in that moment is still a touchstone for policymakers, and has been referred to by former Fed Chair Jerome Powell as an example of how judgment can sometimes outperform technical models of the economy.

However, the one-time jazz musician’s monetary policy acumen later came into question as critics attacked his policies for fueling a series of asset price bubbles and laying the groundwork for the 2007-2009 financial crisis.

“I think the deification that came just before the financial crisis was never really deserved, and I think the lambasting that he took after he left was never fully deserved either,” said Stephen Oliner, a former senior Fed official.

Greenspan, who fell in love with math through an obsession with baseball statistics, won quick plaudits for a strong response to the Black Monday stock market crash of 1987, just two months after he took office.

He also steered the US economy through the 1990-91 recession, the 1997-1998 Asian and Russian financial contagion, the collapse of the dot-com stocks bubble in 2000, and the turbulent economic aftermath of the Sept 11, 2001, attacks.

Along the way, biographer Sebastian Mallaby detailed, he became a consummate Washington power player able to maneuver presidents and cabinet secretaries into making the decisions he felt were best, sometimes without them realising who pulled the strings.

At the Fed’s vaunted Jackson Hole gathering in 2005, two leading economists billed him as perhaps the greatest central banker of all time.

But when the housing price bubble that had grown during his final four years in office finally burst, it savaged his once-stellar reputation - along with the global economy.

Whatever Greenspan’s merits in the moment, his successors steadily pushed the Fed in a new direction, rolling out financial crisis response tools to address problems Greenspan had never confronted, such as zero interest rates, and shifting from opaque communications to more frequent speeches, a set inflation target, and regular press conferences.

In addition to critiques of his monetary policy, critics slammed Greenspan, a powerful advocate for the light regulation of financial markets, for a hands-off attitude that allowed banks to make disastrous housing market bets.

Greenspan subsequently admitted to being “shocked” that he was wrong in his assumption that bankers’ self-interest would deter them from taking actions that imperiled the survival of their own institutions.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House of Representatives Committee on Oversight and Government Reform, in 2008.

But as apologies go in Washington, it fell far short of what his most ardent critics sought.

Former US Federal Reserve chairman Alan Greenspan being sworn in to testify before the House of Representatives Committee on Oversight and Government Reform in Washington on Oct 23, 2008. PHOTO: REUTERS

Some economists also felt the chairman, who never disguised he was a Republican, dented his political independence by backing tax cuts in 2001 proposed by President George W. Bush, although he also worked closely with Democratic President Bill Clinton.

The second-longest-serving Fed chair behind William McChesney Martin, Greenspan was first tapped by President Ronald Reagan in 1987 and was later re-appointed by Presidents George H.W. Bush, Bill Clinton and George W. Bush.

He was 80 when he left the Fed in 2006 but moved smoothly into a new career as a consultant and adviser with his own firm, Greenspan Associates, offering insights on where he thought the economy was going for big fees.

At the Fed, Greenspan built on the successes of his predecessor, Paul Volcker, who stamped out the raging inflation of the late 1970s and early 1980s. Indeed, in his final few years at the central bank Greenspan spent more time worrying about the risks of deflation taking hold than about high inflation re-emerging.

The ten-year expansion in the 1990s was fueled in part by a huge stocks rally that Greenspan suggested in 1996 might reflect an “irrational exuberance.” He later backed away from that comment, saying it was not his role to second-guess investors.

Greenspan was often referred to as the second most powerful person in the country, after the president, because of the central bank’s ability to influence the economy through changes in short-term interest rates.

Pensive, serious and quiet, he laid out his views in elliptical testimonies and speeches that were parsed endlessly by pundits. He once warned an economists’ group that he spent a lot of his time worrying about being too clear.

“What I’ve learned at the Fed is a new language called ‘Fed speak.’ We learn to mumble with great incoherence,” he said.

He could speak in such a roundabout way that his Mitchell said she “just didn’t get it” the first few times he proposed marriage. The couple dated for 12 years before they married in April 1997. It was the second marriage for both.

Greenspan said he did his best thinking in the bathtub, indulging in baths that sometimes lasted two hours as he read reports and wrote speeches and public testimony.

Greenspan at the memorial service of US Senator John McCain in Washington on Sept 1, 2018. PHOTO: REUTERS

Born in New York City on March 6, 1926, Greenspan was the only child of Rose and Herbert Greenspan. His parents divorced when he was young and he was raised in a small apartment in the Washington Heights section of New York with his mother and grandparents.

Greenspan’s first love was music and he spent two years at New York’s Juilliard School studying the clarinet. He toured briefly with a swing band as a saxophone player before turning to economics studies at New York University.

In his youth, Greenspan was a friend and associate of the novelist Ayn Rand, who espoused the supremacy of the free markets and the profit motive in books such as “Atlas Shrugged” and “The Fountainhead.”

Before his Fed years, he chaired the Council of Economic Advisers under President Gerald Ford in the 1970s. He also ran an economics consulting firm called Townsend-Greenspan and Co. for years.

When Greenspan succeeded Volcker, some worried he might not live up to his tough-minded, cigar-chomping predecessor.

But Greenspan soon proved his mettle by pumping liquidity into financial markets to calm the October 1987 stocks crash. His quick action, which is now seen as a textbook example of how to handle such crises, was credited with staving off a recession. REUTERS