MICHEL MARTIN, HOST:
Longtime Federal Reserve Chairman Alan Greenspan has died of complications from Parkinson's disease. He was 100 years old. Greenspan was the rare celebrity among central bankers, lionized for the long-running economic boom of the 1990s. His reputation was tarnished, however, by the Global Financial Crisis, which struck a decade later. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: Alan Greenspan was a talented jazz musician. As a young man, he played both clarinet and saxophone and even studied at Juilliard. But it was economics that made him a rock star and a symbol of the widely shared prosperity at the end of the 20th century.
(SOUNDBITE OF SONG, "I SHOULD'VE MARRIED MY FATHER-IN-LAW")
TIM WILSON: (Singing) Only in God and Alan Greenspan we trust.
HORSLEY: In the boom times - the 1990s, when it seemed every barber shop had a TV tuned to the stock market channel - ordinary Americans hung on Greenspan's every word. Never mind that the Fed chairman sometimes sounded as if he were speaking a foreign language.
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ALAN GREENSPAN: Looking at the overall gross domestic price index from a macro point of view confirms the essential order of magnitude of the bias implied.
HORSLEY: Greenspan liked to write speeches in the bathtub, and it was his listeners who were sometimes left feeling underwater. He deliberately garbled his syntax to avoid saying anything that might move financial markets. A notorious exception came in 1996, when Greenspan seemed to suggest that stock prices might be getting ahead of themselves.
(SOUNDBITE OF ARCHIVED RECORDING)
GREENSPAN: How do we know when irrational exuberance has unduly escalated asset values?
HORSLEY: The warning that exuberant investors might not be quite rational sent temporary shivers through global stock markets. But Greenspan's own stock continued to climb. He was married to NBC news anchor, Andrea Mitchell, and the two made a somewhat unlikely power couple. Jay Leno once joked at a White House Correspondent's Dinner they even outshined Bill and Hillary Clinton.
(SOUNDBITE OF ARCHIVED RECORDING)
JAY LENO: I want to say a special hello also to the wife of the most powerful man in the world, Andrea Mitchell. Andrea Mitchell, where are you? Andrea Mitchell, ladies and gentlemen.
(LAUGHTER)
HORSLEY: Joking aside, Greenspan was considered a master of monetary policy. He led the Federal Reserve for almost two decades under four different presidents. Much of his tenure was marked by falling unemployment - and traditionally, when unemployment gets that low, central bankers raise interest rates to ward off inflation. But Princeton economist Alan Blinder says Greenspan broke with that tradition and kept interest rates relatively low.
ALAN BLINDER: He was willing to watch and wait as the unemployment rate drifted lower and lower and lower and lower, and we still had no inflation.
HORSLEY: Greenspan's gamble paid off, and the economy kept booming for a decade. Although critics argue his easy money policies also helped to inflate the dot-com bubble and later fueled the subprime mortgage meltdown. Greenspan refused to use the Fed's regulatory powers to crack down on risky lending. His libertarian philosophy was shaped in part by the novelist Ayn Rand.
ANNE HELLER: Greenspan said that Ayn Rand put the moral foundation under capitalism for him.
HORSLEY: Rand's biographer, Anne Heller, says Greenspan was part of the author's inner circle. He contributed to her book on capitalism, and when Greenspan joined the Ford administration, Rand attended his swearing-in ceremony. Greenspan believed bankers didn't need heavy-handed regulation because their own self-interest would prevent them from taking undue risks. Only after risky banking helped trigger the Global Financial Crisis in 2008 - two years after he left the Fed - would Greenspan sheepishly tell a congressional panel he'd been wrong.
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GREENSPAN: I was shocked because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
HORSLEY: But the idea that bankers will sometimes take dangerous risks if they're allowed to, should not have come as a surprise to Greenspan. Decades earlier, he'd played a bit part in the Savings and Loan Crisis, which was a kind of dress rehearsal for the 2008 meltdown. As a private economist in the 1980s, Greenspan provided a testimonial for what he called seasoned and expert management at Lincoln Savings and Loan, hoping to ward off regulation. Lincoln later collapsed, costing taxpayers billions, and its boss, Charles Keating, went to prison for fraud.
Self-interest - it seems - is not always enough to protect taxpayers and investors from the risky moves made by others. Economist Vincent Reinhart says it took courage for Greenspan to acknowledge that.
VINCENT REINHART: For Alan Greenspan to say, well, maybe markets don't always get it right, is a reflection on his entire career, not just his tenure at the Fed.
HORSLEY: Greenspan will be remembered as both a maestro of monetary policy and a reluctant regulator. His legacy is shaped by the boom he fostered and by the bust he failed to prevent. Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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