Alan Greenspan, once viewed as the genius behind the economic growth of the last two decades, is getting a bit touchy now that his peers are saying he probably caused our present bust.The Wall Street Journal's
Greg Ip has an excellent interview:
Alan Greenspan's reputation is under siege, and he's incredulous.
Hailed three years ago as "the greatest central banker who ever lived," the retired chairman of the Federal Reserve now is being criticized for his management of the U.S. economy before he retired in 2006.
The Fed's low rates and laissez-faire regulatory oversight during his final years are widely blamed for sowing the seeds of today's financial crisis -- one that began in the U.S. housing market and is now battering banks, stock markets, borrowers and consumers around the world.
For much of his 18 years atop the world's most-influential economic institution, Mr. Greenspan was lionized for the economy's performance. Now, he notes, he's being second-guessed for it.
"I was praised for things I didn't do," Mr. Greenspan said during one of three interviews at his sun-drenched office in downtown Washington, D.C. "I am now being blamed for things that I didn't do."
Now 82 years old, Mr. Greenspan wants to set the record straight before the ink dries on the first draft of the financial crisis' history. The former Fed chief doesn't deny that he cares about his reputation. But the larger issue at stake, he says, is getting the lessons of the crisis right.
"The [wrong] evaluation of this period -- and how to avoid the problems associated with it -- will give you the wrong answers and the wrong policies," he says.
The scrutiny of Mr. Greenspan's record has taken on urgency now that the Bush administration and congressional Democrats are skirmishing over how to overhaul U.S. financial regulation. If Mr. Greenspan's critics prevail, then financial companies will likely face tighter oversight and less freedom in the products they offer. If Mr. Greenspan's views carry the day, the trend toward self-policing will continue. A repudiation of Mr. Greenspan's monetary policies could tempt the Fed to raise interest rates relatively quickly after the current crisis passes, and even attempt to deflate future bubbles with higher interest rates.
Mr. Greenspan says he doesn't regret a single decision. In his view, many critics are ignoring evidence in his favor and failing to assess the process by which he made decisions. To prove his point, he draws on texts of old speeches and news clippings and even a letter, written by a now-deceased colleague, downplaying a policy disagreement the two once had.
His tone modulates between earnest, bemused and dismayed. No stranger to controversy, he easily brushes off the comments of longtime antagonists. He chuckles at political cartoons, such as one likening his recent memoir, "The Age of Turbulence," to O.J. Simpson's "If I Did It."
The criticisms that get under his skin are those from friends and former colleagues, many of them respected economists who backed his policies at the time but now say, in hindsight, that the calls were wrong. "I do take it seriously if my peers think I have misstated the facts," he says. "But where's the evidence? Too many people make accusations by assertion. I think it's improper."