Alan Greenspan, Longtime Fed Chair and Ayn Rand Disciple, Meets Ultimate ‘Invisible Hand’

“For decades, he preached that the self-interest of the predator was the invisible hand of the common good,” Yanis Varoufakis said after the man who led the US central bank under four presidents died aged 100.


Then-US Vice President George H.W. Bush (left) administers the oath to Federal Reserve Chair Alan Greenspan as President Ronald Reagan looks on, in the White House in Washington, DC on August 11, 1987.
(Photo by Getty Images)

Brett Wilkins
Jun 22, 2026
COMMON DREAM


Alan Greenspan, whose policies during nearly 20 years as US Federal Reserve chair fueled soaring economic inequality and helped create the conditions for multiple economic crashes, died Monday at age 100 after a long battle with Parkinson’s disease.

While many corporate media outlets published hagiographic obituaries lionizing the “Maestro” who presided over nearly two decades of low inflation, rising stock prices, and American economic confidence, critics focused on Greenspan’s role in promoting dangerous deregulation and “easy money” policies that inflated financial bubbles, with sometimes disastrous results.

Robert Reich—who served as US labor secretary under President Bill Clinton during all of Greenspan’s tenure—called him “in many ways the most powerful person in America” during that era.

“If any single person was responsible for the financial crisis of 2008, it was Greenspan.”

“He maintained an iron grip over the Fed, and almost single-handedly decided on interest rates,” Reich wrote. “He essentially fired George H. W. Bush by raising interest rates so high (ostensibly to ward off the inflation then threatening the economy) that the economy took a dive, and voters blamed Bush. This was enough to convince my boss, Bill Clinton, to do exactly what Greenspan wanted—which was to reduce the federal budget deficit and thereby destroy much of the agenda Clinton ran on (and I helped create).”

“I don’t want to speak ill of anyone who has passed. Greenspan was an extremely charming, intelligent, and thoughtful man,” Reich added. “But the truth must be told: If any single person was responsible for the financial crisis of 2008, it was Greenspan. That crisis—the worst collapse since 1929, which led to the worst recession in decades, in which millions of Americans lost their jobs, savings, and even their homes—resulted from the deregulation of Wall Street that Greenspan advocated.”

Former Greek Finance Minister Yanis Varoufakis wrote on X: “His epitaph? A singular, glorious confession, ‘I found a flaw in my model of the world.’ A flaw, he said, as though it were a leaky pipe, not a total collapse of the intellectual architecture that anointed him Oracle. For decades, he preached that the self-interest of the predator was the invisible hand of the common good.

“Then, in 2008, the beast devoured the table, and to his credit, he blinked, admitting that his entire worldview—the one that central bankers canonized and the world swallowed—was a fairy tale for rentiers,” Varoufakis added. “He did not, of course, admit to culpability. That would require a moral compass, a device notably absent from his Ayn Randian toolbelt. No, he merely noted the flaw, as a meteorologist might note a gust of wind, and returned to his well-earned silence.”

Born 10 miles from Wall Street in Manhattan’s Washington Heights during one of the most infamous economic bubbles of all time, Greenspan was a protégé of libertarian writer and philosopher Ayn Rand and was influenced by the Atlas Shrugged author’s moral defense of capitalism, her fierce advocacy of deregulation, and her insidious insistence that self-interest was socially beneficial.

Their relationship cooled as Greenspan embraced more mainstream economic policies despised by Rand and gradually became a leading steward of the very sort of state-shepherded system she deeply distrusted.

After heading President Gerald Ford’s Council of Economic Advisers, Greenspan was appointed chair of the Fed by President Ronald Reagan in 1987. He would remain in the post well into George W. Bush’s second term.

Greenspan generally favored low interest rates, especially after crises like the 1987 stock market crash, the 1998 Long-Term Capital Management crisis, and the 2001 recession. His fame grew after he suggested that the economy might be experiencing a tech-driven “productivity miracle,” language that many investors took as validation that traditional valuation limits were obsolete.

Critics would later call it a “productivity mirage.”

Staunch devotion to low interest rates by Greenspan’s Fed boosted stock prices and real estate values under “easy money” policies. Many investors came to believe that the Fed would intervene aggressively whenever markets fell sharply—the so-called “Greenspan Put.”

However, since ownership of financial assets (and the firms that sell and promote them) is concentrated among the wealthy, it was the rich who benefited most from Greenspan’s polices. When bubbles burst, as they did after the dot-com boom that ended in early 2000 and during the 2008 global financial crisis, the rich bounced back thanks to their diversified portfolios and bailouts, while middle- and lower-income households were wiped out through asset devaluation, foreclosures, and job losses.

“It is no exaggeration to say the global financial crisis of 2008 had an enormous and lasting impact on American life and the way ordinary people view elites,” New York Times global economic correspondent Peter S. Goodman said on social media. “It is also no exaggeration to say that Alan Greenspan has as much responsibility for the crisis as an individual can.”

“For those not old enough to remember, it is difficult to state his aura during his time of greatest influence,” Goodman continued. “When he told Americans that they should buy houses and use variable-rate mortgages to do it, they listened. Much is made of his econ jargon-laden vernacular that went over the heads of nearly all listeners.”

“That was central to the mystique,” he added. “When he went to the Hill and spoke to Congress, most people had no idea what he was talking about but assumed that smarter kids did. And so his quasi-religious faith in the efficiency of markets as the ultimate insurance against risk went unchallenged and became dogma, and the risks kept building."

The Mixed Legacy of Alan Greenspan

AYN RAND'S ACOLYTE

Dean Baker

 June 24, 2026

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Alan Greenspan testifies before the House Financial Services Committee in 2005. Public Domain.

I was not an Alan Greenspan fan, but I will give him some serious credit on his passing. I’ll also give him serious blame for missing two huge bubbles, the collapse of which gave us serious recessions. I’ll also add a comment about the opaque way he ran the Fed, to which I fear our new Fed chair is returning.

Starting with the positive: Greenspan allowed the unemployment rate to fall to 4.0 percent as a year-round average in 2000. This was huge. The prevailing view in the economics profession had been that the unemployment rate could not fall much below 6.0 percent without triggering spiraling inflation.

Greenspan was not a mainstream economist and therefore did not accept this view. In 1995, when the unemployment rate was already under 6.0 percent, he famously argued with two ostensibly more liberal Fed governors, Janet Yellen and Lawrence Meyer, over this point. They both wanted Greenspan to raise rates to head off inflation. Greenspan insisted that he didn’t see evidence of inflation and was not going to raise rates just because the unemployment rate was low.

Greenspan stood pat as the unemployment rate fell to 5.0 percent and then 4.5 percent, and finally in 2000 to 4.0 percent as a year-round average. We actually had several months of 3.9 percent and 3.8 percent unemployment. This allowed millions of workers to get jobs who would have otherwise remain unemployed if Yellen and Meyer had gotten their way.

Even more importantly, the low unemployment of the late 1990s gave tens of millions of workers the bargaining power to secure real wage gains. This was the first period of sustained real wage growth for low- and middle-wage earners since the early 1970s. The low unemployment of this period also set a benchmark for the future where economists recognized that 6.0 percent unemployment was not a floor. (Yes, we can do better with a federal jobs policy, but that is not Alan Greenspan’s domain.)

Greenspan and the Bubbles

Greenspan decided to ignore the two huge bubbles that grew under his watch. He famously commented about the irrational exuberance in the stock market in 1996, which quickly sent stocks tumbling. Greenspan then mumbled some nonsense about growth possibly justifying market prices, and stocks recovered and continued to rise for another three and a half years.

The bubble began to deflate in March of 2000, and the market eventually lost close to half its value. The NASDAQ, where the major tech stocks were listed, lost almost 80 percent. The popular wisdom is that the resulting recession in 2001 was short and mild. This was not true from a labor market perspective. We went four full years without creating jobs, and the strong real wage growth of the late 1990s quickly stopped and went into reverse.

The next bubble was even worse. There was already some evidence of a housing bubble in the late 1990s, as house sale prices began to outpace inflation. They also outpaced rents, which were still rising roughly in step with overall inflation.

This divergence increased in the 00s, triggered in part by low interest rates, but also incredibly lax lending standards. At their peak in 2006, house sale prices had risen 70 percent in real terms compared to where they were a decade before. The subsequent collapse gave us a financial crisis and the worst recession since the Great Depression, as the unemployment rate nearly reached 10.0 percent.

After the collapse, all the people in economic policy positions gave themselves a “Who could have known?” amnesty. The answer, of course, was everyone should have known. The dodgy lending practices of mortgage issuers were hardly a secret; they were bragging about it. People were buying houses with no money down and in many cases even borrowing more than the value of their home to cover moving expenses and closing costs. The same was true for the securitization that allowed issuers to offload any mortgage immediately after it was sold, regardless of the quality.

In an interview that Greenspan gave to the Washington Post after the crash, he commented that he had become concerned that the share of subprime mortgages had jumped to 25 percent in 2005. He said he couldn’t remember if he had passed this information on to his successor, Ben Bernanke, when he stepped down in 2006.

This was infuriating. The idea that the Fed chair was not aware of the explosion in subprime lending (even worse Alt-A, which had risen to 15 percent) was truly incredible. It’s not clear if it would be worse if Greenspan’s claim was true or not.

Remedies for Bubbles

I have written about this before, but I’ll just make a couple of points here. First, in the case of the stock bubble, I think talk would have gone a long way. Greenspan’s offhand “irrational exuberance” comment had a huge effect. Imagine he had the Fed churning out papers showing how stock prices were completely out of line with pretty much all projections of future GDP and profit growth.

The point is not that investors had to agree with Alan Greenspan, but they would have to answer him. The “who could have known?” defense might save a fund manager when it is just random gadflies yelling about a bubble. It is a very different story when a Fed chair is putting out the warning. A person managing tens of billions at a pension fund or endowment will be looking at the unemployment line if, after the crash, they say they didn’t pay Greenspan any attention.

In the case of the housing bubble, in addition to warnings the Fed has substantial regulatory authority. The bad practices of banks and other financial institutions were easy to see. The Fed could have cracked down. Instead, they could not even be bothered to issue updated mortgage lending guidelines until after the crash.

Greenspan Thought the Fed Should be Opaque

This one is timely since our new Fed chair, Kevin Warsh, seems to want to turn back to the Greenspan era. Since I just wrote about this last week, I’ll pick up part of what I said.

“Under Alan Greenspan, the Fed was deliberately opaque. I remember walking to work one day in the mid-1990s, the day after Greenspan had given some big speech. Back then, we had newspaper boxes where you could buy the paper. I always glanced at the machines as I walked by. Half of the papers had headlines saying something to the effect of “Greenspan Plans to Raise Rates.” The headlines for the other half were something to the effect “Greenspan to Leave Rates Unchanged.”

“Greenspan, who followed his press closely, was reportedly delighted. He had given a major speech, and no one had any idea what he was talking about.

“Ben Bernanke, his immediate successor, wanted the Fed to be more transparent. He explicitly introduced the concept of “forward guidance” to Fed policy: the idea that the Fed would tell people where it expected interest rates to go in the near-term future. In their tenures as Fed chair, both Janet Yellen and Jerome Powell continued this policy. Their view was that they did not want the public to be surprised by the Fed’s decisions.”

I argued that this makes good sense both from the standpoint of the economy, being clear about Fed plans creates more certainty for investment decisions and is also important for reducing corruption. As I noted:

“Wayne Angell, who served as a Fed governor from 1986 to 1994, began consulting at the rate of $100 a minute (roughly $220 in today’s dollars) after he stepped down from his position in 1994. Angell may have been an insightful observer of the national economy, but he was obviously being paid for his knowledge of his former colleagues’ views on interest rates.

“If the Fed is fully transparent about its intentions, no one is going to get paid $220 a minute for their insights on what the FOMC is thinking. We don’t know how far Warsh will look to go with this move away from Fed transparency, but the further he goes the more room there is for corruption.”

Anyhow, Greenspan’s deliberate opaqueness was not a good policy for the Fed. We should hope that Kevin Warsh does not follow his example as chair

Kevin Warsh, Fed Transparency, and 

Corruption

Dean Baker

 June 22, 2026

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This week was the first meeting under new Fed Chair Kevin Warsh of the Federal Reserve Board’s Open Market Committee (FOMC). Warsh has promised to restructure the Fed, but it is still not clear he means by this.

Donald Trump very explicitly picked Warsh because he expected that he would lower interest rates. That goes against Warsh’s past history of being an inflation hawk. In his earlier tenure as a Fed governor during the Great Recession, Warsh was arguing against expansionary monetary policy even when the unemployment rate was close to 10%. And he was concerned about hyperinflation when the actual inflation rate was near zero.

We still don’t know how Warsh plans to resolve these seemingly contradictory impulses. He has said that he wants to reduce the Fed’s balance sheet. This would mean selling off trillions of dollars of bonds that the Fed bought both during the financial crisis and more recently during the pandemic.

Selling off bonds would have the effect of raising the long-term interest rates that matter most for the economy, like car loans and mortgages. But it’s possible that Trump wouldn’t be bothered, since he probably doesn’t understand the connection between reducing the balance sheet and raising rates.

The other area where Warsh has indicated he wants to make a sharp departure from past practice is the amount of information that the Fed discloses to the public about its discussions. This reverses the trend toward greater transparency under the last three Fed chairs.

Under Alan Greenspan, the Fed was deliberately opaque. I remember walking to work one day in the mid-1990s, the day after Greenspan had given some big speech. Back then, we had newspaper boxes where you could buy a newspaper. I always glanced at the machines as I walked by. Half of the papers had headlines saying something to the effect of “Greenspan plans to raise rates.” The headlines for the other half were something to the effect “Greenspan to leave rates unchanged.”

Greenspan, who followed his press closely, was reportedly delighted. He had given a major speech, and no one had any idea what he was talking about.

Ben Bernanke, his immediate successor, wanted the Fed to be more transparent. He explicitly introduced the concept of “forward guidance” to Fed policy: the idea that the Fed would tell people where it expected interest rates to go in the near-term future. In their tenures as Fed chair, both Janet Yellen and Jerome Powell continued this policy. Their view was that they did not want the public to be surprised by the Fed’s decisions.

As an economic matter, this makes good sense. It is desirable to reduce uncertainty so that businesses and individuals can better make plans for the future. If a business is considering borrowing to expand, it may want to put its plans on hold if the Fed says it is likely to raise rates substantially in the near future. By sharing as much information as practical, businesses and individuals can be better informed about the likely future state of the economy and take this information into account in making their decisions.

Transparency is also important for combatting corruption. If anyone has inside knowledge of the Fed’s interest rate plans, they can make a huge amount of money, at the expense of others in the market, through their inside trades.

Wayne Angell, who served as a Fed governor from 1986 to 1994, began consultingat the rate of $100 a minute (roughly $220 in today’s dollars) after he stepped down from his position in 1994. Angell may have been an insightful observer of the national economy, but he was obviously being paid for his knowledge of his former colleagues’ views on interest rates.

If the Fed is fully transparent about its intentions, no one is going to get paid $220 a minute for their insights on what the FOMC is thinking. We don’t know how far Warsh will look to go with this move away from Fed transparency, but the further he goes, the more room there is for corruption.

And that is what makes Warsh a true Trump appointee. No administration in U.S. history has ever been as blatantly corrupt as Trump in his second term. Warsh seems intent on bringing that corruption to the Fed.

This first appeared on Dean Baker’s Beat the Press blog.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC.