Alan Greenspan (1926– ) chairman of the Federal Reserve Board

Alan Greenspan was born in New York City on March 6, 1926, the child of divorced parents. After attending public schools he briefly matriculated at the prestigious Juilliard School of Music but subsequently left to tour with a jazz band. Greenspan finally graduated from New York University with a master’s degree in economics in 1950, but three years later, he failed to complete his doctorate at nearby Columbia University. However, he had become a disciple of business writer Ayn Rand, who championed the free market and discouraged government intervention in the economy. After befriending Alan Burns, a future economist of note, Greenspan hit upon the idea of formulating economic analyses and forecasting for senior executives. He then founded the consulting firm of Townsend-Greenspan and Company, which proved extremely successful and included such prestigious clients as Alcoa Aluminum, Capital Cities/ABC, J. P. Morgan, and the Mobil Corporation. Greenspan had by then become an extremely wealthy individual, and his success in business did not go unnoticed in the political realm. In 1968, presidential aspirant Richard Nixon proffered him a post as economic adviser, and in 1974 Arthur Burns, now head of the FEDERAL RESERVE, tendered him the position of chairman of the Council of Economic Advisors. The national economy was beset by rising inflation, and Greenspan accepted the challenge out of a sense of public duty. Under his tight-fisted tutelage, inflation dropped from 11 percent to 6 percent in three years, a considerable success. In 1977, Greenspan abandoned the public sector and returned to economic consulting. However, his expertise had indelibly impressed the political establishment, especially those adhering to Republican political philosophies. The turning point in his career occurred in 1987, when Treasury Secretary James Baker suggested him to replace outgoing Paul A. VOLCKER as chairman of the strategically important Federal Reserve. The nomination may have raised eyebrows considering Greenspan’s inclination to avoid the limelight, but his rumpled, bespeckled persona belied a disciplined aptitude for economic policy.

Commencing in 1989, Greenspan enacted his trademark fiscal austerity programs to control the onset of inflation, but his main goal was to promote economic growth. Lending practices were subsequently tightened, but he occasionally allowed an infusion of cash into the economy to prevent it from sputtering. By 1992, he had managed to usher in a period of general prosperity, although it occurred too late to help the presidency of George H. W. Bush. During the first term of President Bill Clinton, inflation spiked upward again, but Greenspan steadfastly refused to inflate the money supply. In fact, he actually raised interest rates to cool off the otherwise bounding economy. This brought on a degree of tension with the White House, which was prepared to accept some inflation in return for fuller employment, but in 1996, President Clinton surprisingly nominated Greenspan for another four years as chairman. Consequently, unemployment for the remainder of Clinton’s second term in office was only 4.7 percent, inflation dropped to only 2 percent, and the national economy boomed. It was a period of unprecedented prosperity and growth.

Such was Greenspan’s reputation that in 2000 he was nominated for another term as chairman by Clinton. But halfway through George W. Bush’s first term, the nation was beset by a serious downturn and unemployment rates exceeding 6 percent, so Greenspan continually adjusted interest rates lower to stimulate growth. He boldly and confidently predicted a return to better conditions within a few months, and few among the political establishment either confronted or questioned his sagacity. Unquestionably, Greenspan is one of the most influential chairmen of the Federal Reserve, and his tenure has been generally marked by unrivaled growth, low inflation, and prosperity.

Further reading

• Chevallier, Francois X. Greenspan’s Taming of the Wave, or, a Golden Age Revisited. New York: St. Martin’s Press, 2000. 
• Martin, Justin. Greenspan: The Man behind the Myth. Cambridge, Mass.: Perseus Press, 2000. 
• Tuccille, Jerome. Alan Shrugged: The Life and Times of Alan Greenspan, the World’s Most Powerful Banker. Hoboken, N.J.: Wiley, 2002. 
• Woodward, Bob. Maestro: Greenspan’s Fed and the American Boom. New York: Simon & Schuster, 2000. 

John C. Fredriksen