The death of Alan Greenspan has prompted a spate of analyses on his legacy, and they're not all flattering. When Greenspan left his longtime post as chair of the Federal Reserve in 2006, he was hailed as a kind of economic oracle, writes Nick Timiraos in the Wall Street Journal. But two years later, the financial meltdown put a crimp in that image. Greenspan's core belief—that markets would restrain their own excesses—morphed into a central criticism of him as the 2008-09 crisis unfolded. Under Greenspan, the Fed largely stood back from policing exotic mortgage products and Wall Street's complex securities built on shaky home loans.
"The right question is whether Alan Greenspan, this huge guru who had tremendous influence, could have rung the bell better. And he could have," says former colleague and adviser Donald Kohn. "He was a bit too complacent." Greenspan himself conceded in October 2008 that his faith in banks' self-interest had left him in "shocked disbelief." The Washington Post notes that Greenspan shot down a request in 2000 by Fed governor Edward Gramlich to crack down on iffy mortgage loans, and "those 'subprime' loans would serve as the initial trigger to the crisis that enveloped the world in 2008." Greenspan also steered Congress away from regulating derivatives, and the ensuing demise of those markets was another major factor in the crash.
By the time he died at 100 on Monday, the man once jokingly deemed so indispensable he'd be propped up Weekend at Bernie's-style had seen his legacy reshaped: still credited with helping tame inflation and navigate 1990s turbulence, but indelibly tied to the blind spots that set the stage for the worst financial crisis since the Great Depression.
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