The article attracted a number of critical responses from forum contributors, which consists of some of the world’s leading economists (including two Nobel Memorial Prize in Economic Sciences winners, Edmund Phelps and Joseph Stiglitz), who, finding causation between Greenspan's policies and the discontinuities in financial markets that followed, criticized Greenspan mainly for what many believed to be his unbalanced and immovable ideological suppositions about global capitalism and free competitive markets. For example, one forum contributor, Paul de Grauwe, wrote: “Greenspan’s article is a smokescreen to hide his own responsibility in making the financial crisis possible. Greenspan, who was at the helm of the most important monetary institution in the world, failed to take his responsibility to supervise the financial markets blinded as he, and his colleagues, were by a belief that markets and bankers know better than governments.” Other notable critics included J. Bradford DeLong, Alice Rivlin, Richard Werner, Christopher Whalen, Michael Hudson, and Willem Buiter.^[64]

On April 6, Greenspan responded to his critics in a follow-up article entitled “A response to my critics” in which he rigorously defended his ideology as applied to his conceptual and policy framework, which, among other things, prohibited him from exerting real pressure against the burgeoning housing bubble or, in his words, "leaning against the wind" (which became a catchphrase used during the discussion). Greenspan argued, "My view of the range of dispersion of outcomes has been shaken, but not my judgment that free competitive markets are by far the unrivaled way to organize economies." He concluded: "We have tried regulation ranging from heavy to central planning. None meaningfully worked. Do we wish to retest the evidence?"^[65]

On April 9, the Financial Times associate editor and chief economics commentator, Martin Wolf, responded to the discussion with an article entitled “Why Greenspan does not bear most of the blame,” defending Greenspan primarily as a scapegoat for the market turmoil. Several notable contributors in defense of Greenspan included Stephen Roach, Allan Meltzer, and Robert Brusca.^[66]

On October 15, 2008, Anthony Faiola, Ellen Nakashima and Jill Drew wrote a lengthy article in the Washington Post titled "What Went Wrong"[6]. In their investigation, the authors claim that Greenspan vehemently opposed any regulation of financial instruments known as derivatives. They further claim that Greenspan actively sought to undermine the office of the Commodity Futures Trading Commission, specifically under the leadership of Brooksley E. Born, when the Commission sought to initiate regulation of derivatives. Ultimately, it was the collapse of a specific kind of derivative, the mortgage-backed security, that triggered the economic crisis of 2008.

On October 17, 2008, attorney Timothy D. Naegele wrote an article in the American Banker entitled, "Greenspan's Fingerprints All Over Enduring Mess", which argues that Greenspan's actions and inactions triggered the economic crisis of 2008. The article discusses the economic tsunami that has been rolling worldwide with devastating effects; the author asserts that Greenspan is the architect of the enormous economic "bubble" that burst globally. The author cites Giulio Tremonti, Italy's Minister of Economy and Finance, who said: "Greenspan was considered a master. Now we must ask ourselves whether he is not, after [Osama] bin Laden, the man who hurt America the most."^[67]

In Congressional testimony on October 23, 2008, Greenspan acknowledged that he was "partially" wrong in opposing regulation and stated "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity -- myself especially -- are in a state of shocked disbelief."^[28] Referring to his free-market ideology, Greenspan said: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.” Rep. Henry Waxman (D-CA) then pressed him to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Waxman said. “Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.” ^[68] Greenspan admitted fault in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected. During testimony, Rep. John Yarmuth (D-KY) compared Greenspan to Bill Buckner, the Boston Red Sox first baseman whose fielding error caused the team's loss in the 1986 World Series.^[28]

[edit] Political views and alleged politicization of office

Greenspan describes himself as a “lifelong Libertarian Republican”.^[69]

In March 2005, in reaction to Greenspan's support of President Bush's plan to partially privatize Social Security, Democratic Senate Minority Leader Harry Reid attacked Greenspan as “one of the biggest political hacks we have in Washington” ^[70] and criticized him for supporting Bush's 2001 tax cut plan.^[71] Then-Democratic House Minority Leader Nancy Pelosi added that there were serious questions about the Fed's independence as a result of Greenspan's public statements.^[72] Greenspan also received criticism from Democratic Congressman Barney Frank and others for supporting Bush's Social Security plans in favor of private accounts.^[73][74][75] Greenspan had said Bush's model has "the seeds of developing full funding by its very nature. As I've said before, I've always supported moves to full funding in the context of a private account."^[76]

Others, like Republican Senator Mitch McConnell, disagreed that Greenspan was too deferential to Bush, stating that Greenspan “has been an independent player at the Fed for a long time under both parties and made an enormous positive contribution”.^[77]

Economist Paul Krugman wrote that Greenspan was a “three-card maestro” with a “lack of sincerity” who, “by repeatedly shilling for whatever the Bush administration wants, has betrayed the trust placed in the Fed chairman”.^[78]

Republican Senator Jim Bunning, who opposed Greenspan's fifth reconfirmation, charged that Greenspan should comment only on monetary policy, not fiscal policy.^[79] However, Greenspan had used his position as Fed Chairman to comment upon fiscal policy as early as 1993, when he supported President Clinton's deficit reduction plan, which included tax hikes and budget cuts.^[80]

In 1997, the Wall Street Journal editorial page asserted that Greenspan believed one of his jobs as Chairman was to maintain a high enough level of worker insecurity to discourage employees from demanding pay raises and benefit increases.^[81]

[edit] Honors

President George W. Bush presents the Presidential Medal of Freedom to Alan Greenspan, on November 9, 2005 in the East Room of the White House.

Greenspan was awarded the Presidential Medal of Freedom, the highest civilian award in the United States, by President George W. Bush in November 2005.^[82] His honorary titles include Knight Commander of the British Empire, bestowed in 2002 and Commander of the Légion d'honneur (Legion of Honor). In 2006, Greenspan was awarded the Department of Defense Medal for Distinguished Public Service.^[83]

In 2004, Greenspan received the Dwight D. Eisenhower Medal for Leadership and Service, from Eisenhower Fellowships. In 2005, he became the first recipient of the Harry S. Truman Medal for Economic Policy, presented by the Harry S. Truman Library Institute. In 2007, Greenspan was the recipient of the inaugural Thomas Jefferson Foundation Medal in Citizen Leadership, presented by the University of Virgina.

[edit] Further reading

• Fleckenstein, William (2008). Greenspan's Bubbles. McGraw-Hill. ISBN 007159158-3. 
• Greenspan, Alan (2007). The Age of Turbulence. Penguin Press. ISBN 1-5942-0131-5. 
• The Economist (October 15–21, 2005 issue) page 29, "After Alan"^{[verification needed]}
• Batra, R (2005). Greenspan's Fraud: How Two Decades of His Policies Have Undermined the Global Economy. New York: Palgrave Macmillan. OCLC: 57169884. ISBN 1403968594. 
• Tuccille, Jerome (2002). Alan Shrugged: Alan Greenspan, the World's Most Powerful Banker. Wiley. ISBN 0-471-39906-X. 
• Martin, J (2000). Greenspan: The Man behind Money. Cambridge, Mass: Perseus. OCLC: 45188865. ISBN 0738202754. 
• Woodward, Bob (2000). Maestro: Greenspan's Fed and the American Boom. Touchstone. ISBN 0-7432-0412-30-7432-0562-6. 

[edit] See also

• Greenspan put
• List of United States political appointments that crossed party lines

[edit] References

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