Former Federal Reserve Chairman Alan Greenspan, once hailed as a maestro for directing a booming economy but who later received some of the blame for the housing bust and financial meltdown that occurred after he left office, has died, according to his wife, Andrea Mitchell. He was 100.
Greenspan served five terms as Fed chairman under four presidents, starting with Ronald Reagan, who nominated him in 1987. His term under George W. Bush expired in 2006. His eighteen-and-a-half year tenure is the second longest as head of the nation’s central bank.
His death was announced in a statement by Mitchell, a correspondent for NBC News and his wife for 29 years.
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“Alan passed away at our home this morning at the age of 100 from complications of Parkinson’s Disease,” Mitchell said in her statement.
“He was a giant of a man who helped shape the U.S. economy for decades under presidents of both parties, but was always honest in acknowledging his mistakes,” she said.
Born in New York City, Greenspan taught economics in the 1950s at New York University, his alma mater, while he was chairman and president of economic consulting firm Townsend-Greenspan & Co. that he helped run for 21 years. He served as the director of domestic policy research with Richard Nixon’s 1968 presidential campaign and was a part-time adviser to him after he took office.
In 1974, the final year of the Nixon administration, Greenspan became chairman of the President’s Council of Economic Advisers and stayed throughout the tenure of President Gerald Ford. He returned to his economic consulting work after Ford’s 1976 defeat and continued until his appointment to the Fed.
Two months into Greenspan’s tenure, the stock market suffered its largest one-day percentage decline, when the Dow plunged 22% on October 19, 1987, a day that became known as “Black Monday.” The next day, Greenspan announced that the Fed was ready “to serve as a source of liquidity to support the economic and financial systems.” His assurance helped the market begin to make a relatively quick recovery.
During his time at the Fed, the US economy experienced one of the strongest peacetime economic expansions in its history. Unemployment fell below 4%, the stock market reached what were then record highs, and the federal government began running budget surpluses rather than deficits.
After the bursting of the dot-com bubble in 2000, the economy slipped into a recession in 2001 and was further shaken by the September 11 terrorist attacks. That prompted Greenspan and the Fed to cut its key interest rate to levels previously unheard of then, eventually reaching 1%.
Many economists say that those low rates helped inflate the housing bubble, encouraging investors to give mortgages to borrowers who would not previously have qualified for home loans. People also criticized the Fed for not exercising better oversight of the mortgage market during those go-go years.
Greenspan dismissed talk of a housing bubble while he was in office, saying that while individual local markets might be overpriced, there was no evidence of a nationwide bubble.
But when home values collapsed nationwide and foreclosures and bank failures soared in the fall of 2008, he testified before the House Oversight Committee that he was in a “state of shocked disbelief.”
He said that while he had tried to warn about the riskiness of some of the home loans, the economic damage wrought by the bursting of the bubble had “turned out to be much broader than anything I could have imagined.”
He later testified that the low interest rates he and the Fed set did not cause the housing bubble or the ensuing crisis and he believed he had been right 70% of the time when he was in office.
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