Greenspan, Alan

born March 6, 1926, New York, N.Y.

U.S. economist and chairman of the board of the Federal Reserve System.

He grew up an only child and initially wanted to be a professional musician. He received his doctorate from New York University in 1977. Having become a private economic consultant, Greenspan served as chairman of the president's Council of Economic Advisers under Pres. Gerald Ford. From 1981 to 1983 he chaired the bipartisan National Commission on Social Security Reform. In 1987 Pres. Ronald Reagan appointed him chairman of the Federal Reserve Board, a position he continued to hold under Presidents George Bush, Bill Clinton, and George W. Bush. As Federal Reserve chairman, he fought inflation through controlling the discount rate.

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▪ 2001

      On Jan. 4, 2000, economist Alan Greenspan was nominated by Pres. Bill Clinton to a fourth four-year term as chairman of the Board of Governors of the U.S. Federal Reserve System (Fed). In a bipartisan vote on February 3, the U.S. Senate overwhelmingly confirmed the nomination. Thus, the fiscally conservative chairman, a staunch advocate of deregulation and balanced budgets as well as a determined foe of inflation, continued to wield enormous power over the U.S. economy. He was commonly given a major share of the credit for the economic expansion that began in March 1991 and that on Feb. 1, 2000, officially became the longest in U.S. history. In addition, his influence on global finance was so extensive that in September 1999 The Sunday Times named him one of the three most powerful people in the British Isles.

      During the years of his chairmanship, Greenspan became known for his decisive use of monetary policy to steer the economy between the hazards of inflation and recession. When the Dow Jones Industrial Average fell a record 508 points on Oct. 19, 1987, shortly after he took command at the Fed, he acted quickly to ensure liquidity in the markets, but he moved too slowly to prevent the U.S. from falling into a recession in 1990. When Asian countries underwent a financial crisis and an economic downturn beginning in 1997, he lowered U.S. interest rates in 1998 in order to cushion the economy. As the Asian economies recovered and the U.S. economy continued its solid expansion, he then began a series of interest-rate hikes in June 1999 that continued into 2000. His justification for these increases included what he called “unsustainable” rates of growth in the U.S. economy, the lowest unemployment rates in three decades, and “overextended” stocks, particularly among technology issues, and he spoke publicly about the “wealth effect” of booming stock prices. Given the extraordinarily high rates of growth in productivity and the lack of apparent inflation, however, some observers argued that Greenspan's policies were unnecessary or even might be counterproductive. Nonetheless, by mid-2000 the chairman's moves seemed to be having the effects he wanted, with signs that the economy was slowing and that the stock market had become less speculative.

      Greenspan was born on March 6, 1926, in New York City. He received B.S. (1948), M.A. (1950), and Ph.D. (1977) degrees in economics from New York University and was a disciple of the writer Ayn Rand, who was known for advocating laissez-faire capitalism. From 1958 Greenspan headed his own consulting firm. He then entered the public sector as an adviser to Pres. Richard Nixon (1968–74) and went on to be chairman of the Council of Economic Advisers (1974–77) and chairman of the National Commission on Social Security Reform (1981–83). He also served on other advisory boards and on the boards of a number of private companies. In 1987 Pres. Ronald Reagan nominated him to succeed Paul A. Volcker as chairman of the Fed.

Robert Rauch

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▪ American economist

born March 6, 1926, New York, New York, U.S.

 

 American economist and chairman of the Board of Governors of the Federal Reserve System, whose chairmanship (1987–2006) continued through the administrations of four American presidents.

      At age five Greenspan demonstrated his proficiency in mathematics by reciting baseball batting averages and performing large calculations in his head. As a youth he studied music at the Juilliard School and played jazz saxophone and clarinet in the Henry Jerome band. He went on to study economics at New York University (B.A., 1948; M.A., 1950) and began work on a doctorate at Columbia University under economist and future Federal Reserve Board chairman Arthur F. Burns. He met novelist Ayn Rand (Rand, Ayn) in 1952 and adopted her philosophy of individual effort, self-interest, and laissez-faire capitalism.

      Greenspan left Columbia in 1953 and formed Townsend-Greenspan and Co., Inc., an economic consulting firm in New York. After William Townsend's death in 1958, Greenspan became president and chief owner. Following Rand's urging, he served in 1967 as an adviser for Richard Nixon (Nixon, Richard M.)'s 1968 presidential election campaign. Greenspan helped with Nixon's transition to the office but refused a permanent appointment in the Nixon administration, advising the president only informally and serving on presidential task forces and commissions. As chairman of the Council of Economic Advisers (1974–77) during Gerald Ford's presidency, Greenspan promoted policies that caused the rate of inflation to drop from 11 to 6.5 percent. In 1977 Greenspan returned to his firm in New York and became an adjunct professor at New York University, where he was awarded a Ph.D. in economics.

      Appointed by President Ronald Reagan (Reagan, Ronald W.) to fill Paul A. Volcker (Volcker, Paul)'s term as chairman of the Federal Reserve Board, Greenspan took office on August 11, 1987. During the years of his chairmanship, Greenspan became known for his decisive use of monetary policy in steering the economy between the hazards of inflation and recession. When the Dow Jones Industrial Average (Dow Jones average) fell a record 508 points on October 19, 1987, shortly after he took command at the Fed, he acted quickly to ensure liquidity in the markets. When Asian countries underwent a financial crisis and an economic downturn beginning in 1997, he lowered U.S. interest rates to cushion the economy. As the Asian economies recovered and the U.S. economy continued its solid expansion, he initiated a series of interest-rate hikes in June 1999. He also drew the public's attention to what he called “unsustainable” rates of growth in the U.S. economy and “overextended” stock prices toward the end of the 20th century.

      Greenspan was given a share of the credit for the longest official economic expansion in U.S. history (March 1991–February 2000). His influence on global finance was considered so extensive that in September 1999 The Sunday Times of London named him one of the three most powerful people in the British Isles. International recognition of Greenspan's achievements continued: in 2000 the French government awarded him the Legion of Honour, and in 2002 Queen Elizabeth II of the United Kingdom named him an honorary Knight of the British Empire. Greenspan retired as chairman of the Federal Reserve Board in January 2006. He published a memoir, The Age of Turbulence: Adventures in a New World, in 2007.

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