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Robert Reich: R.I.P. Alan Greenspan: You were charming, thoughtful, powerful, and wrong
Link: https://robertreich.substack.com/p/rip-alan-greenspan
Alan Greenspan has died at the age of 100.
My students don’t recognize his name but you probably do. When he was chairman of the Federal Reserve — for more than 18 years, from August 11, 1987 to January 31, 2006 — he not only ran the U.S. (and most of the world’s) economy but was also in many ways the most powerful person in America.
He maintained an iron grip over the Fed, and almost single-handedly decided on interest rates. But that was just the start of his power. He essentially fired George H. W. Bush by raising interest rates so high (ostensibly to ward off the inflation then threatening the economy) that the economy took a dive, and voters blamed Bush.
This was enough to convince my boss, Bill Clinton, to do exactly what Greenspan wanted — which was to reduce the federal budget deficit and thereby destroy much of the agenda Clinton ran on (and I helped create). As I wrote in my memoir of those years, Locked in the Cabinet, “Greenspan has the most important grip in town: Bill’s balls, in the palm of his hand."
I don’t want to speak ill of anyone who has passed. Greenspan was an extremely charming, intelligent, and thoughtful man. But the truth must be told: If any single person was responsible for the financial crisis of 2008, it was Greenspan. That crisis — the worst collapse since 1929, which led to the worst recession in decades, in which millions of Americans lost their jobs, savings, and even their homes — resulted from the deregulation of Wall Street that Greenspan advocated.
Greenspan pushed Clinton and Congress to repeal the Glass-Steagall Act, which since the Depression decade of the 1930s had separated investment banking from commercial banking, thereby preventing banks from gambling with personal savings. He also argued vigorously against regulating derivatives — essentially, financial bets on financial bets — that proved to be weapons of mass financial destruction.
Greenspan finally acknowledged that the crisis caused him to rethink his free market ideology. “I have found a flaw,” he told a congressional committee. “I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms …. I was shocked.”
Shocked? Shocked that the free market would succumb to greed, self-dealing, betting, and fraud? Shocked that decades of deregulation of Wall Street would plunge the nation and the world into crisis? Please. ...
- more at link -
My students don’t recognize his name but you probably do. When he was chairman of the Federal Reserve — for more than 18 years, from August 11, 1987 to January 31, 2006 — he not only ran the U.S. (and most of the world’s) economy but was also in many ways the most powerful person in America.
He maintained an iron grip over the Fed, and almost single-handedly decided on interest rates. But that was just the start of his power. He essentially fired George H. W. Bush by raising interest rates so high (ostensibly to ward off the inflation then threatening the economy) that the economy took a dive, and voters blamed Bush.
This was enough to convince my boss, Bill Clinton, to do exactly what Greenspan wanted — which was to reduce the federal budget deficit and thereby destroy much of the agenda Clinton ran on (and I helped create). As I wrote in my memoir of those years, Locked in the Cabinet, “Greenspan has the most important grip in town: Bill’s balls, in the palm of his hand."
I don’t want to speak ill of anyone who has passed. Greenspan was an extremely charming, intelligent, and thoughtful man. But the truth must be told: If any single person was responsible for the financial crisis of 2008, it was Greenspan. That crisis — the worst collapse since 1929, which led to the worst recession in decades, in which millions of Americans lost their jobs, savings, and even their homes — resulted from the deregulation of Wall Street that Greenspan advocated.
Greenspan pushed Clinton and Congress to repeal the Glass-Steagall Act, which since the Depression decade of the 1930s had separated investment banking from commercial banking, thereby preventing banks from gambling with personal savings. He also argued vigorously against regulating derivatives — essentially, financial bets on financial bets — that proved to be weapons of mass financial destruction.
Greenspan finally acknowledged that the crisis caused him to rethink his free market ideology. “I have found a flaw,” he told a congressional committee. “I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms …. I was shocked.”
Shocked? Shocked that the free market would succumb to greed, self-dealing, betting, and fraud? Shocked that decades of deregulation of Wall Street would plunge the nation and the world into crisis? Please. ...
One supposes that Robert Reich had this obituary written and stashed away, waiting for the opportunity to publish it.
Please read the rest on Mr. Reich's substack (OP link.)
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