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- [00:02]
Host
This is a bonus episode of history as it happens. It's June 24, 2026. Let's go back about 30 years to the summer of 1987. Alan Greenspan appears at a Senate confirmation hearing after being nominated by President Reagan to chair the Federal Reserve.
- [00:18]
Alan Greenspan
It's a privilege as always, to appear before this distinguished committee today for your consideration of my appointment as Chairman of the Board of Governors of the Federal Reserve System. I especially appreciate the expeditious fashion.
- [00:33]
Host
Twenty years later, after what many consider two very successful decades steering monetary policy, Greenspan stepped down. It was 2006, and a senator by the name of Joe Biden spoke for many when praising Greenspan.
- [00:45]
Joe Biden
And in my view, no one in the world who spoke on economic affairs was more listened to than you were, Mr. Chairman. Not always understood, but listened to. It's a little daunting to have you before this committee, someone of your stature. You yourself once said, quote, if I turn out to be particularly clear, you probably misunderstood what I said.
- [01:07]
Host
But just a couple years after that, Greenspan's legacy would be upended, says the New York Times obituary. Only after he stepped down, and especially following the crisis on Wall street in 2008, the near collapse of the mortgage market and the ensuing deep recession were his legacy and philosophy challenged in a concerted way. The ideological stamp he put on policymaking came to be associated as well with the destructive consequences of forces that emerged on his watch, including deregulation of banking and Wall street, the loss of American jobs to free trade, and persistent concerns about bubbles in stock and housing prices. Millions of Americans, myself included, learned what a derivative was in the those days. So what did Alan Greenspan leave us? Historian Nelson Lichtenstein teaches at UC Santa Barbara. He's the author of A Fabulous Failure at the Clinton Presidency and the Transformation of American Capitalism, now available in paperback. Nelson Lichtenstein, welcome back to the show.
- [02:07]
Nelson Lichtenstein
Delighted to be here.
- [02:08]
Host
So, Alan Greenspan, he certainly was a giant in his field. One of the most important figures in the late 20th century United States. Before we dive into some specifics, what are your overall thoughts about Greenspan?
- [02:21]
Nelson Lichtenstein
Well, he was, you're right, he was head of the Fed for 19 years, from 1987, I think it was, to 2006. That's a long time. Got reappointed by presidents of both parties. I think he presided over the Fed during this crucial period when really financialization became kind of at the core really, of the American political economy. And that had consequences of enormous and deleted. He was skillful. Was skillful at this people, all the obituaries called him maybe the first and only celebrity head of the Fed. And there was an element of truth to that, in part because his words could move the market. And he was famous for being indistinct and people having to view him as an oracle as it was. What is he actually saying? Look, the main thing is he was a significant figure. He was a conservative, but a skillful conservative who presided over the Fed during the transition of America to a thoroughly financialized kind of economic system.
- [03:23]
Host
He was a political operator in addition to being a central banker.
- [03:27]
Nelson Lichtenstein
Yeah, he was very much. He was infatuated with Ayn Rand and her, you know, extreme libertarian capitalist perspective. Also a view that saw capitalist impulses as the most moral impulses in the world. Ayn Rand was actually hated by some theists, by the Buckley crowd, who were Christians anyway. She viewed capitalism in tooth and claw as the most moral system. Greenspan kind of all, he moved away from Ayn Rand in later years to be more practical. One thing that I think he retained from Ayn Rand was the view that just the normal operation of the market, the ultimate result would be, it was self correcting in a fundamental way. So in the 1990s, at various moments when people said, look, there's a certain corruption going on in the stock market and in bond trading and these derivatives. We have to regulate it. And Greenspan said, no, no, it's self correcting. It's impossible for capitalists in a free market or bond traders to be corrupt. Because if you're corrupt, then the clients, the purchasers will understand that they won't buy your bonds, they won't buy your stocks. So he was very much against regulation in that sense.
- [04:44]
Host
That's a huge part of his legacy, is it not? We can jump to the end of the story here. We'll circle back to the beginning of his career in a bit. But that's a huge part of his legacy today, that his ideology was ruinous. There's the famous exchange between him and Henry Waxman. This is at a hearing in the House of Representatives after Greenspan's time as Fed chair is over. He's brought back to testify. And you probably remember this where Waxman says, were you wrong?
- [05:09]
Henry Waxman
And my question for you is simple, were you wrong?
- [05:14]
Alan Greenspan
Partially. But let's separate this problem into its component parts. I took a very strong position on the issue of derivatives and the efficacy of what they were doing for the economy as a whole, which in effect is essentially to transfer risk from those who have very difficulty, have Great difficulty in absorbing it. To those who have the capital to absorb losses if and when they occur, these derivatives are working. Well, let me put it to you very specifically.
- [05:49]
Henry Waxman
So you don't think you were wrong in not wanting to regulate the derivatives?
- [05:53]
Alan Greenspan
Well, it depends which derivatives we're talking about.
- [05:56]
Henry Waxman
Okay, let me interrupt you because we do have a limited amount of time, but you said in your statement the whole intellectual edifice of modern risk management collapsed. You also said those of us who have looked to the self interest of lending institutions to protect shareholders equity, myself especially, are in a state of shock, disbelief, end quote. Now that sounds to me like you're saying that those who trusted the market to regulate itself, yourself included, made a serious mistake.
- [06:27]
Alan Greenspan
Well, I think that's true of some products, but not all. I think that's the reason why it's important to distinguish the size of this problem and its nature.
- [06:37]
Henry Waxman
You had an ideology, you had a belief that free competitive. And this is your statement. I do have an ideology. My judgment is that free competitive markets are by far the unrivaled way to organize economies. We've tried regulation, none meaningfully work. That was your quote. You have the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?
- [07:14]
Alan Greenspan
Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. The question is whether it is accurate or not. And what I'm saying to you is yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact. But if I may, may I just finish an answer to the question?
- [07:38]
Henry Waxman
Previously you found a flaw in
- [07:43]
Alan Greenspan
the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
- [07:50]
Nelson Lichtenstein
Of course, 10 years earlier than that there had been a big fight in the latter years of the Clinton administration where a woman named Boxley Bourne, who was head of the Commodity Futures Trading
- [08:00]
Host
Corporation to listen to this entire 24 minute episode tap. Subscribe now in the show notes. You'll enjoy all of our bonus content plus ad free listening and early access or go to historyasithappens.com and become a subscriber today.