Former US Fed chairman Alan Greenspan passes away at 100

Alan Greenspan, the longtime US Federal Reserve chief who presided over an unprecedented period of American economic expansion but was later faulted for failing to rein in markets ahead of the 2008 global financial crisis, has died.

Greenspan - who died on Monday at age 100 - guided the world's biggest economy through a stock market crash in 1987 as he first took up his post, the Mexican and Asian financial crises, the dotcom boom and bust, and the September 11, 2001 attacks.

A native New Yorker who excelled at math as a child but initially studied music before pivoting to economics, Greenspan spent decades in the inner circles of power in Washington, ultimately leading the Fed for presidents of both political parties.


Greenspan was even hailed as the greatest central banker the world has ever known, winning glowing praise for his steady hand and cool demeanor.

Supporters admired his willingness to cut interest rates and keep them low even as unemployment rates fell, which conventional wisdom would cause inflation to spiral out of control. But his impenetrable prose - which he admitted using to avoid committing to any particular course - and his confidence in unfettered markets and institutions to correct themselves frustrated critics, who believed the US economy needed stronger guardrails.

After the world sank into crisis in 2008, his decision not to do anything to rein in the mortgage markets was viewed as naive.

'Committee to Save the World'
Greenspan entered politics in the late 1960s as an adviser to Richard Nixon during his successful campaign for president. Later he accepted the post of White House economic adviser, but he was not confirmed until after Nixon resigned in disgrace, and ended up working for Gerald Ford. In 1987, Republican president, Ronald Reagan, named Greenspan to serve as chair of the Fed, replacing anti-inflation crusader Paul Volcker.

It was a position he would hold until January 2006 serving under four presidents Reagan, George HW Bush, his Democratic successor Bill Clinton and George W Bush.

Greenspan was tested early in his new post - on 'Black Monday' in October 1987, the benchmark Dow Jones Industrial Average collapsed by nearly 23%, still the biggest single-day percentage drop in the index's history. The new Fed chair issued a terse statement promising central bank support, and the Fed pumped liquidity into the financial system. It worked. Rather than another Great Depression like the one that followed the 1929 crash, markets recovered quickly.

Greenspan was later featured on the cover of Time magazine with then Treasury secretary under the banner headline 'The Committee to Save the World'.

‘DANGEROUSLY NAIVE’
But when the US housing market took off in the later 1990s and derivatives again were used to package mortgages to sell to investors -- supposedly to dilute the risk -- the Fed sat back and essentially did nothing.

His faith in the market's ability to regulate itself did not waver, even though the record shows he asked questions about how the Fed could prevent banks from overexposing themselves to such futre risks. Markets came to rely on the "Greenspan put" -- a perceived guarantee the Fed would cut rates whenever they were in trouble.

Those low rates spurred the mortgage market to dangerous heights before it all came crumbling down. Alan Blinder, a Princeton economics professor who served as Fed vice chair, said Greenspan had a "legitimate claim to being the greatest central banker who ever lived." But with the financial crisis in the rear view mirror, he said Greenspan "really fell down on the job when it came to regulatory policy."