Has Alan Greenspan's glowing reputation as Fed Chairman diminished since the financial meltdown?

[astro]

During his heyday asFederal ReserveChairman he was considered the near genius steady hand on the US economy tiller. Has the historical view on the effectiveness of his tenure as Federal Reserve Chairman changed over the last few years?

[Tom_Scud]

@astro

Has the historical view on the effectiveness of his tenure as Federal Reserve Chairman changed over the last few years?

With notably rare exceptions, no.

[EvilTOJ]

He’s not been thought of too fondly ever since he trashed that hotel room.

[Baffle]

I think this call to condemn Greenspan is showing some irrational exuberance on your part.

[JohnT]

@astro

During his heyday asFederal ReserveChairman he was considered the near genius steady hand on the US economy tiller. Has the historical view on the effectiveness of his tenure as Federal Reserve Chairman changed over the last few years?

Yes, quite a bit. Rather than being seen as the “steady hand who guided the US economy for 20-odd years”, he’s now being seen as the “guy who wouldn’t recognize a financial bubble (or do anything about it if it was recognized) if his life depended on it.” His willingness to cut interest rates in 2000-2001 and his unwillingness to raise them later is seen as one of the primary causes of the housing crisis. In Greenspans tenure, the following economic problems surfaced:

1. The 1989 S&L bust
2. The 2000-2001 dot.bomb bust
3. The 2007- housing crisis
4. The 2008-2009 credit crisis (tied to, but not the same, as the housing crisis)
5. The growth of unregulated derivative contracts (unregulated, in part, because Greenspan lobbied to keep them unregulated)
6. The surge of accounting scandals from 1999-2002

Now, of course, none of these are completely his fault, however his policies did contribute to the above issues, especially the calls for deregulation and the constant lowering of interest rates to goose an already booming/bubbling economy.

[Boyo_Jim]

@JohnT

…Now, of course, none of these are completely his fault, …

Correct. They are the fault of the legislators who listened to and obeyed him.

Like Hitler, he would have been just another crazy old crank had not so many people treated his word as gospel.

[The_Second_Stone]

Even Greenspan admits that his idea that the investment bankers would police themselves has been debunked by the credit debt swap debacle.

[Nametag]

@JohnT

Yes, quite a bit. Rather than being seen as the “steady hand who guided the US economy for 20-odd years”, he’s now being seen as the “guy who wouldn’t recognize a financial bubble (or do anything about it if it was recognized) if his life depended on it.” His willingness to cut interest rates in 2000-2001 and his unwillingness to raise them later is seen as one of the primary causes of the housing crisis.

Did you misspeak, or are you confused? Greenspan (more accurately, the Federal Reserve Board of Governors) increased the discount rate in 2000 in response to the dot-com bubble, and lowered it after 9/11.

In Greenspans tenure, the following economic problems surfaced:

1. The 1989 S&L bust

S&Ls have been mismanaged since they were created, and Congress failed horribly in its duty. No one talks about this in connection with Greenspan, and no one blames the Fed for it, except to mention that anti-inflationary policy made things harder for everybody.

2. The 2000-2001 dot.bomb bust

The bust was inevitable, and his suppression of the bubble is one of the causes of his fame.

3. The 2007- housing crisis
4. The 2008-2009 credit crisis (tied to, but not the same, as the housing crisis)
5. The growth of unregulated derivative contracts (unregulated, in part, because Greenspan lobbied to keep them unregulated)

You know Greenspan left the Fed in 2006, right? I’m as willing as anyone to criticize him for his over-reliance on interest rates and monetary policy, and his doctrinaire disdain for regulatory action, but be realistic: the Fed has no authority which could have prevented the crisis, raising interest rates was a dubious proposition in the 2000s, and Greenspan was troubled by the increased activity in derivatives (not enough to speak ardently against them, as he praised creative investment vehicles in general, but enough to add words of warning).

6. The surge of accounting scandals from 1999-2002

What, now Greenspan was the head of the SEC?

Now, of course, none of these are completely his fault, however his policies did contribute to the above issues, especially the calls for deregulation and the constant lowering of interest rates to goose an already booming/bubbling economy.

The Fed lowered its discount rate in 2001 in response to a severe downturn following 9/11. Between 2004 and 2007 the rate was increased from 1% to 5.25%. Goosing the bubble? Hardly.