Former NY Fed President Bill Dudley Talks Alan Greenspan, Warsh

Summary

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Bloomberg Talks: Former NY Fed President Bill Dudley Talks Alan Greenspan

Date: June 23, 2026
Host: Bloomberg
Guest: William (Bill) Dudley, former President of the New York Fed

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Episode Overview

This episode features a wide-ranging discussion with Bill Dudley, former New York Fed president, focusing on the legacy of Alan Greenspan as Fed chairman, recent changes at the Federal Reserve under new leadership, and the ongoing narrative around inflation, monetary policy, and regulation. Dudley shares unique insights drawn from his own experience atop major financial institutions and at the central bank, evaluating past policies and looking ahead to the future of U.S. economic decision-making.

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Key Discussion Points & Insights

1. Alan Greenspan's Legacy and Unique Approach

• Greenspan as a Data-Driven Decision Maker
  Dudley notes that Greenspan differed from other Fed chairs by not being purely academic; he prioritized data over abstract models.

  • "He was basically going from the data to the decision making rather than from the model to the decision making." (01:34, Dudley)
  • Greenspan was quick to recognize changes in the economy, notably during the late 1990s productivity boom, and adjusted policy accordingly.

• Strengths and Blind Spots

  • Openness to changing his mind and updating forecasts.
  • Politically adept across different administrations.
  • However, a key flaw was his belief that asset bubbles couldn’t be identified in real time, leading to a reactive rather than preventive stance on financial stability.
    • "His view is always, you know, can't identify bubbles in real time. So all we can do is clean up after the fact. And obviously the great financial crisis showed that cleaning up after the fact is not always the right approach." (02:16, Dudley)

2. Regulation: Then vs. Now

• Are We Repeating Past Mistakes?
  • Dudley believes the risks today are considerably less than in the lead-up to 2008, citing stronger regulatory regimes post-crisis.
  • Cautions that dismantling regulation now would be dangerous:
    • "It's important we don't throw the baby out with the bathwater." (03:07, Dudley)
  • Stresses that while there are ongoing risks, especially in the non-bank financial sector, lessons from the crisis have made the system more robust.
    • "We did learn a lot of good lessons from the financial crisis that... means the financial system fundamentally is stronger than it was back then." (03:23, Dudley)

3. Greenspan's Overall Legacy (With Hindsight)

• Dudley sees Greenspan as a great central banker—intuitive, data-driven, and diplomatic.
  • "He navigated through Democratic and Republican administrations really well and didn't have the kind of conflicts that a lot of other central bankers have run into, like Jay Powell for example.” (03:53, Dudley)
  • Gives him high marks except for financial stability:
    • "I just wish he'd done a little bit better on the financial stability regulatory side. If he did that, he'd sort of get straight A's." (04:13, Dudley)

4. Fed Under Kevin Warsh — "A Different Regime"

• Communication and Transparency
  • Warsh, the new Fed chair, has shifted toward shorter statements and removed forward guidance.
  • Dudley is critical of the move away from communication:
    • "I'm pretty nervous about his views about not communicating at all about how the Fed is likely to react if economic circumstances change... The Federal Reserve needs to set monetary policy, not financial markets." (04:39, Dudley)
    • Warns of an "indeterminacy" problem if Fed policy simply follows market expectations.
    • Applauds removal of forward guidance but argues transparency—especially around the Fed’s reaction function—remains crucial.
    • Criticizes Warsh for refusing to outline conditions that could lead to tighter policy:
      • "He refused to answer those questions. And I think that's maybe okay for the first press conference, but I don't think that can be sustained over time." (06:15, Dudley)

5. The Disinflation Narrative and Current Economic Context

• Disinflation Developments
  • Host notes a shift in the economic narrative toward disinflation due to declining oil and gasoline prices; Dudley confirms this is expected in the data soon.
  • Urges a broader look at pressures such as chip prices and overall employment:
    • "We still have a lot of price pressures, like for example, chip prices have gone going up really rapidly." (07:26, Dudley)
  • Questions whether monetary policy is actually restrictive, given strong labor markets:
    • "We've had monetary policy at this setting or tighter for three years, yet we're still at an unemployment rate consistent with full employment. So if monetary policy isn't restrictive, then why do you need to cut rates?" (07:38, Dudley)

6. Key Data for Markets Going Forward

• Dudley advises watching the labor market closely, especially payroll growth and unemployment rates.
  • Ongoing strength here would suggest the Fed may need to consider further tightening.
    • "If the economy is strong enough to keep the payrolls growing like the pace they've done over the last few months, the unemployment rates flat to declining, you know, that's going to... push the Fed in the direction of thinking that they need to tighten monetary policy." (08:02, Dudley)
  • Doubts about the Fed’s commitment to tightening under Warsh remain:
    • "The question is what are you actually prepared to do to achieve that outcome? And I don't think we really know that at this point… it's not really clear that there's a lot of content in that statement." (08:28, Dudley)

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Memorable Quotes & Notable Moments

• On Greenspan’s Uniqueness:
  "He was basically going from the data to the decision making rather than from the model to the decision making." (01:34, Dudley)

• On Regulatory Blind Spots:
  "His view is always, you know, can't identify bubbles in real time. So all we can do is clean up after the fact. And obviously the great financial crisis showed that cleaning up after the fact is not always the right approach." (02:16, Dudley)

• On the Changing Fed Communication Approach:
  "The Federal Reserve needs to set monetary policy, not financial markets. And if you're relying on the markets, how do you make the decision?" (05:04, Dudley)

• On Current Monetary Policy:
  "We've had monetary policy at this setting or tighter for three years, yet we're still at an unemployment rate consistent with full employment. So if monetary policy isn't restrictive, then why do you need to cut rates?" (07:38, Dudley)

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Timestamps of Important Segments

• [01:30] – Dudley on Greenspan’s unique, non-academic background and strengths/flaws as Fed chair
• [02:51] – Comparison of pre-crisis and current financial system risks
• [03:45] – Dudley’s assessment of Greenspan’s overall legacy with hindsight
• [04:33] – Dudley’s views on Kevin Warsh, new Fed communication policy, and transparency concerns
• [07:08] – Discussion shifts to present day; disinflation narrative and economic indicators to watch
• [07:59] – Dudley on importance of labor market data for future monetary policy
• [08:28] – Skepticism about how much policy commitment really exists at the Fed today

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Overall Tone & Atmosphere

The discussion is energetic and analytical, with the host and Dudley engaging in rapid back-and-forth. Dudley is at times critical of both historical and current central bank leadership, especially around transparency and the evolution of monetary policy communication, while remaining focused on practical realities and lessons from history. His insights offer listeners a blend of technical analysis and accessible explanations tailored for both policy enthusiasts and broader finance audiences.

Transcript

[A]

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[B]

Bloomberg Audio Studios Podcasts Radio News.

[C]

Joining us now, without exaggeration, the only exception would be Edward Yardeni is a number one person I want to talk to now about the legacy of Alan Greenspan. William Dudley is a different Fed president, yes, of the New York Fed and all, but far more. He built Goldman Sachs economics with Ed McKelvey and the rest, a young Jana Hatzius at the time. Bill Dudley joins us this morning. To me, Bill Dudley and the phrase I've always used is chart, paragraph, chart. And it was a people like Hyman and Yardeni at CJ Lawrence. It was the Bear Stearns combine with Malpass and writing. But more than anyone, it was Goldman Sachs chart, paragraph, chart. Alan Greenspan loved that. At the end of the day, he was a market economist, weaned data. Do we have anyone that can be like Alan Greenspan in our future or was he a one off in the history of our economics?

[D]

Well, the future takes up a long potential time, so I'm sure we'll see someone similar to Greenspan in the future. But you're right, he was a different type of Fed chairman because not only was he very knowledgeable about economics, but he wasn't academic. And so he was basically going from the data to the decision making rather than from the model to the decision making. And so sometimes when the world changed, he got it right before anybody else did. The best example, of course, was the late 1990s when there was this productivity boom and Greenspan held off on tightening monetary policy. So I think he was, you know, an exceptional, exceptional chairman both in terms of his understanding of economics, his openness to data, his willingness to, you know, change his mind and update his, his forecast. I think the only really, you know, blind spot was really his views about financial stability and regulation. His view is always, you know, can't identify bubbles in real time. So all we can do is clean up after the fact. And obviously the great financial crisis showed that cleaning up after the fact is not always the right approach.

[C]

Well, to get into your excellence at Berkeley and to say, okay, it is about the regulation decision, are we making the same mistakes today that the critics say were made in 05 and 06?

[D]

I don't see the same kind of problems. Number one, in terms of, you know, the market having a lot of Assumptions that will ultimately turn out to be wrong. I mean, if you look at 2006, 2007, there was all these assumptions. Triple A CEOs' are safe. Housing markets can never decline on a national basis. You know, you know, there were just a lot of assumptions that turned out subprime lending is not risky. All those assumptions turned out to be dramatically wrong. So I think, you know, I think there's risk to financial stability today, obviously in the non bank financial sector. But the other thing is we have a much more robust regulatory regime. I know, I know we're in the process of dismantling that to a degree. I think it's important that we don't throw the baby out with the bathwater. But you know, we did learn a lot of good lessons from the financial crisis. That I think means that the financial system fundamentally is stronger than it was back then.

[A]

Putting all that together, Bill, what do you think the legacy is for Mr. Greenspan, with a little bit of a

[D]

hindsight here, I think he's obviously going to go down in history as a great central banker. Also go down as someone who was really politically adept. I mean, he navigated through Democratic and Republican administrations really well and didn't have the kind of conflicts that a lot of other central bankers have run into, like Jay Powell for example. So I think that combination of good economic intuition, reliance on data, ability to navigate through Washington really well is pretty special. I just wish he'd done a little bit better on the financial stability regulatory side. If he did that, he'd sort of get straight A's.

[A]

Let's fast forward it to today. Mr. Walsh, we did hear from Kevin Warsh last week for the first time as chairman of the Fed, what were your takeaways?

[D]

Well, I think the big takeaway is, number one, that it's going to be a different regime under Kevin Warsh. The regime change that he promised is in the process of happening. You can just tell it right off the bat with a very much shortened statement and in getting rid of Ford guidance, I think is completely appropriate. But I'm pretty nervous about his views about not communicating at all about how the Fed is likely to react if the economic circumstances change. This reliant on the market's views to sort of guide policy I think is a mistake. The Federal Reserve needs to set monetary policy, not financial markets. And if you're relying on the markets, how do you make the decision? Markets basically don't price to what they think the Fed should do. They price to what the Fed what they think the Fed will do. So if you're relying on the markets, you're sort of, you have this indeterminacy about what you should do. So I think. So I think that's a mistake. I think, you know, I think transparency, I think is very helpful in terms of the conduct of monetary policy because you do want markets to think along with the Fed when a strong economic report comes out. You want the markets to reprice in terms of their expectation about the monetary policy path. But to do that, well, you need good communication markets to understand the Fed's monetary policy reaction funding. So I think the risk here is Kevin is throwing out the baby with the bathwater. I have no problem getting rid of Ford guidance, but don't throw out, you know, information about the Fed's monetary policy reaction function at the same time. And I think he did that at the press conference because he was asked very explicitly what would cause you to want to tighten monetary policy. And he really wouldn't answer the question. I mean, obviously obvious answer would be if inflation stays longer for, for higher than I expect, then we'll obviously have to tighten monetary policy or if the economy is stronger than we expect, then obviously I'll advise up my estimate of a neutral monetary policy. But he refused to answer those questions. And I think that's maybe okay for the first press conference, but I don't think that can be sustained over time.

[C]

Dudley fired up. That's what we're saying right now. William Dudley with us and we continue, the former president of the New York Fed. You're sitting there, Bill, all fired up and everybody knows I agree with you on this. I mean, to be polite about it, the heritage of your shop called Goldman Sachs and how this is carried this forward is a disinflation narrative. Is the big shock after this war with West Texas Intermediate A 7149. So I could get with constructive news a 69 handle here. Are we prepared, Bill Dudley, for the disinflation narrative that could come?

[D]

Well, there is going to be a disinflation narrative really next month, right away, when we get the PC and CPI data for June, because obviously oil prices and gasoline prices have come down this month. But I think that you have to look in the broader context. What's the pressure on resources more broadly? We still have a lot of price pressures, like for example, chip prices have gone going up really rapidly. And I think the, I think the fundamental question really for the monetary policy outlook is the question is monetary policy actually restricted today? And my own personal view is that there's not much evidence of that. I mean, we've had monetary policy at this setting or tighter for three years, yet we're still at an unemployment rate consistent with full employment. So if monetary policy isn't restrictive, then why do you need to cut rates?

[A]

What's the next data point, Bill, that you think the market should really be focusing on?

[D]

I think the labor market is really important here. I mean, I think if the economy is strong enough to keep the payrolls growing like the pace they've done over the last few months, the unemployment rates flat to declining, you know, that's going to, that's going to continue to push the Fed in the direction of thinking that they need to tighten monetary policy. I don't, you know, I'm a little uncertain about, you know, how fast monetary policy is tightening is likely to occur or what that probability is because, because it's not clear how much commitment Kevin Warsh has to actually doing it. I mean, the talk is cheap. Of course everybody's in favor of price stability, but the question is what are you actually prepared to do to achieve that outcome? And I don't think we really know that at this point. I mean, couldn't, he couldn't have obviously said the opposite. I'm not in favor of price stability. So it's not really clear that there's a lot of content in that statement.

[C]

Just valuable. Thank you so much. Bill Dudley with us, a former president, the New York Fed. In remembrance of the life of Alan Greenspan.

[B]

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