Raymond J. de Souza: Alan Greenspan was world’s first celebrity banker

Alan Greenspan, chairman of the U.S. Federal Reserve for almost 20 years, is seen in a file photo from March 26, 2010. Greenspan, once celebrated as the “maestro” of the American economy, died on June 22 at the age of 100. Photo by Andrew Harrer / Bloomberg

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Before Mark Carney was called the George Clooney of global finance, the rock star of central banking, there was Alan Greenspan, chairman of the Federal Reserve for nearly 20 years (1987-2006), who died this week at age 100. No George Clooney was he, but he became the first celebrity central banker, improbably “making the gossip pages as something of an unlikely ladies’ man.” He dated Barbara Walters and married Andrea Mitchell.

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Ladies’ man or not, he was all the presidents’ man. He served 19 years at the Fed, appointed five times by four presidents — Ronald Reagan, George Bush Sr., Bill Clinton and George Bush Jr.

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Greenspan lived a long life, born in the same year (1926) as the epitome of celebrity, Marilyn Monroe. He outlived her by 64 years, entering the inner circle of American presidents later and remaining there longer.

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More to the point, he was born in the sesquicentennial year of Adam Smith’s Wealth of Nations (1776) and died in its semiquincentennial. Over that century, Smith’s ideas waxed for a very long period of time; Greenspan’s appointment and long tenure at the Fed were both a sign and a cause of how dominant Smith’s understanding of the economy was by the 1980s and beyond. Yet the global financial crisis of 2008 undermined confidence in Smith, and Greenspan’s great humbling came in his public confession that there were some important things that he had got wrong.

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Greenspan had been celebrated as the “maestro” of the American economy, navigating three major disruptions — the 1987 stock market crash, the aftermath of 9/11, and the bursting of the dot-com bubble — while otherwise presiding over a long period of strong growth, low inflation and low interest rates.

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Shortly after he retired in 2006, a crisis began to stir in the American housing-related financial markets, and before long the entire economy came crashing down — not only in America. It was a truly global financial crisis. It was Mark Carney’s first challenge as governor of the Bank of Canada; that Canada came through it with relatively less damage and no bank failures contributed to the growth of Carney’s reputation.

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In October 2008, Greenspan was summoned before Congress to answer for his failure to sufficiently regulate housing finance. He had believed that it was unnecessary to do so, as the self-interest of corporations would prevent them from reckless risk-taking in the subprime mortgage market.

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“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he testified before a House committee.

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It was a signal moment. For decades his appearances before Congress were marquee events, with investors hanging off every syllable and subordinate clause for insight into where the American economy was headed. This time there was no mystery. Greenspan had got it wrong, and wrong because he trusted too much in the magic of self-interest to serve the common good.