Economic Policy and Financial Crisis Missteps

It's consider this, where every day we go deep on one big news story Today, remembering a Titan among federal reseserve chairs. It's my pleasure to welcome Alan Greenspan official service to his country. Alan Greenspan, the longtime Federal Reserve Chairman, being sworn into office by President Ronald Reagan in nineteen eighty seven. Greensman led the central Bank for nearly twenty years. Much of his tenure was marked by falling unemployment and an economic boom Two years after he retired came the two thousand eight financial crisis Critics argue that it was his hands off approach to regulation that set the stage for the crash Greenspan admitted that his approach wasn't perfect. Here he is speaking to the House Oversight commommittee in october two thousand eight. I made a mistake in presuming. The self interest of organizations, specifically banks and others was such is that they were best capable are protecting their own shareholders and their equity in the firms. Greenspan died Monday at the age of one hundred. Consider this. Alan Greensman ran the Federal Reserve for nearly two decades and was a celebrity among central bankers. What legacy does he leave behind From NPR, I'm J Wannaa Summers This message comes from Better Help Summer can feel like a sprint, kids home, trips to plan, routines flipped upside down It's easy to slip into survival mode, just trying to get through it. Then suddenly, it's over. And you're wishing you enjoyed the days just a little bit more theraappy can help you slow down and actually be present for the moments that matter. With better helpel, you can connect with a licensed therapist from anywhere on your schedule. Don't just survive the summer To Thrive, visit betterhelp d. com slash and PR This message comes from the Freedom From Religion Foundation. A healthy democracy protects the rights of people with many different beliefs. One way the Constitution does that is through the separation of church and state. The Freedom From Religion Foundation is an organization that works to defend that constitutional boundary. Visit ffrf dot us slash public Or text public to five eleven five eleven to learn more because protecting the First Amendment protects everyone Txt fees may apply It was Consider this from NPR. Here to talk more about Alan Greenspan's leegacy is NPR's Scott Horseley, Bither. Hi, good be with you. Good to talk with you, so Scott Greensstman led the Federal Reserve under four different presidents, Ronald Reagan, Bill Clinton, both George Bush's. How did the economy fare while he was in charge You know, the highs greatly outnumbered the lows, and that's partly a credit to Greenspan. He'd only been on the job for a couple of months when the stock market crashed in nineteen eighty seven, tumbling more than twenty percent on what became known as Black Monday And Greenspan moved quickly to make sure banks had plenty of money to keep lending so the gears the economy did not seize up. And as a result, that crash of ' eighty seven' barely a blip now in financial history. Donald Cohn, who worked with Greenspan at the Fed, says future chairs used similar tactics when they were faced with shocks like nine eleven or the coronavirus pandemic. in a sense what he did pattern for Fed reaction to these crises Greenspan was a larger than life figure whose celebrity was not confined to the business pages of the newspaper. Like his predecessor, Pul Volker, he raised interest rates at times to keep prices under control But Greenspan is perhaps best remembered for a decision not to raise interest rates, even though a lot of people thought he'd have to What was going on that people thoughtt would require a rate hike? In the mid to late nineteen nineties, we had what seemed at the time like very low unemployment rates. And when that happened, central bankers often raise interest rates. keep the economy from overheating and causing inflation But know, Greensman was skeptical of that kind of formulaic policy making. He was a very talented jazz musician. He studied clarinet at Juilliard, and he was not afraid to improvise Cohes says Greenspan's read of the economic data was that productivity was rising, so the economy was not in danger of overheating and inflation would stay in check he had to Resist So Cventional wisdom wanted him to do, which was to raise rates to prevent a pickup in inflation But it wasn't just an idea he had. It was all backed by data reason And you hear echoes that argument today from people who want lower interest rates. Kevin Warsh, who just took over as Fed chairman says he hopes to follow where Greens's Ban led. Chairman Greenspan was the first to tell me and show me what this role demands. At his own swearing in last month, Warsh praised Greenspan for his energy and his sense of purpose. Now Greenspan was widely quoted, but Scotta I have to ask, didid people really understand what he was saying You know, Greenspan was fluent in the obscure language known as Fed spepeak, and he sometimes deliberately obfuscated to avoid saying anything that might move financial markets. overall gross domestic price index A macro point of view confirms the essential order of magnitude of the bias Ride Did you get that one? One memorable exception was when Greenspan's words did rattle markets. It came in nineteen ninety six at a time when the stock market was booming and he fueled fears that it might be a bubble. How do we know when irrational exuberance as unduly escalated asset values. NBC's Andrea Mitchell alluded to that notorious comment in her statement today, saying Greenspan was irrationally exuberant for baseball, Washington's proro football team, tennis, golf, and music Greenspan retired as Fed Chairman back in two thousand six. twowo years later, of course, we had the financial crisis. How did that affect his legacy It definitely tarnished it. You know, Greenspan was a libertarian. He was a follower of the philosopher and novelist Ane Rand