GREENSPAN, ALAN

Alan Greenspan (1926–), chairman of the Federal Reserve Board since 1987, has sometimes been described as the second most powerful person in the
world. Greenspan's slightest utterance could directly affect the lives of millions of citizens and could alter the monetary policies of governments on six continents. His tenure at the Federal Reserve has been marked by low unemployment, near-zero inflation, a strong dollar, and unprecedented prosperity.

The only child of divorced parents, Greenspan was born and raised in New York City where he attended public schools. He enrolled in the prestigious Juilliard School of Music but, after a year he left to play tenor saxophone and clarinet on the road with Henry Jerome's swing band.

Toward the end of World War II (1939–1945), he entered New York University where he received a Bachelor of Arts in economics in 1948 and a Master's in economics in 1950. He studied for a doctoral degree at Columbia University but left in 1953 before completing work on it. (In 1977, based on his impressive career as an economist, New York University awarded him a Ph.D. in economics without a formal dissertation.) At Columbia he became close friends with economist Arthur Burns, who later became Chairman of the Federal Reserve Board from 1970–1978.

In the early 1950s he came under the intellectual influence of novelist Ayn Rand, the author of The Fountainhead. Gloria Borger in U.S. News and World Report reported that Greenspan said of Rand, "What she did was to make me see that capitalism is not only efficient and practical, but also moral." With this view in mind Greenspan virtually invented the business of providing economic analyses specifically for senior business executives. He and William Townsend founded the economic consulting firm of Townsend-Greenspan & Co., Inc. which provided industrial and financial institutions with forecasts and other business-related services. The firm was immediately successful and Greenspan became a wealthy man. He was soon in demand as a forecaster and adviser and was named to the boards of such prestigious companies as Alcoa, Capital Cities/ABC, J.P. Morgan & Co., and Mobil Corporation.

In 1968 Greenspan was recruited to serve as an adviser to then presidential candidate Richard Nixon (1969–1974). In 1974 Greenspan's friend, Arthur Burns, urged him to serve as chairman of the Council of Economic Advisors. Burns felt it was Greenspan's "patriotic duty" to combat the inflation was threatening capitalism. Greenspan accepted the position and began his battle against inflation on September 1, 1974. For the next three years, under his leadership, the rate of inflation dropped from eleven percent to six-and-a-half percent. Ten years later, then Treasury Secretary James Baker (1985–1988) nominated Greenspan to the chairmanship of the Federal Reserve. Little wonder Greenspan was the only nominee for the position.

The Federal Reserve system ("the Fed") is a complex organization of independent parts. It is made up of twelve regional Federal Reserve banks, each with a president, board of directors, officers, and research staff. In Washington DC, a board of governors also maintains a staff of top economists. Chairman Greenspan exercised strong and effective leadership of the Fed. Greenspan's personal charm and his mastery of data helped secure his position as undisputed chief.

Greenspan's steady hand calmed uncertain domestic and global economic markets. From 1989 to 1992 he tightened lending practices but also injected cash into the U.S. economy to ensure recovery from the post–Cold War economic downturn. He also refused to inflate the money supply in reaction to a temporary worldwide price hike for oil; thus price stability remained. By 1992 the economy was on an upward trend. In 1994 Greenspan raised interest rates several times in a successful effort to thwart possible inflation. The ultimate result, despite what critics warned, was a very low 4.7 percent unemployment rate. Over the next few years the Fed gradually decreased the prime lending rate. As a result, the economy boomed at an historic pace, the federal budget balanced, and the nation's inflation rate fell below two percent.

By the accounts of his contemporaries, Greenspan was considered the best chairman the Federal Reserve Board had ever seen. In 1998 a Louis Harris survey of 400 senior executives gave Greenspan a favorable rating of 97 percent. Economists at all points along the theoretical spectrum awarded him high marks. The 1990s, as a period marked by peace and prosperity in the United States, could easily be called the Age of Greenspan.

GREENSPAN, ALAN

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