Background
Alan Greenspan was born on March 6, 1926. He is best known for serving as the 13th Chairman of the Federal Reserve from 1987 to 2006. He attended college and received a B.S. in 1948 and an M.A. in 1950 in economics from New York University. Greenspan has worked with many powerful and important figures such as Richard Nixon and Ayn Rand. His close relationship with Ayn Rand is connected through his belief in Objectivism. He is also the chairman and president of Townsend-Greenspan & Co., Inc., an economic consulting firm in New York City.
Best Know For
Alan Greenspan is recognized for how he handled the stock market crash of Black Monday. Greenspan is also known for his role in the dot-com economic boom of the 1990’s. Another important event that Greenspan is identified with is the current housing “bubble” that lead to the economic crisis of 2008.
Black Monday was the largest one-day percentage decline of market value in history. The main causes for this decline were program trading, overvaluation, illiquidity, and market psychology. Greenspan was able to control this crash by adding liquidity to the market.
A group of internet-based companies using market values as a business model, rather than conventional models caused the dot-com bubble. These companies dismissed the actual profit of the company and focused on the market value. The rapidly rising market values as well as venture capitalism and individual speculation caused the bubble to burst. The Federal Reserve raises interest rates six times between 1999 and early 2000 so slow down the bubble. However, the Fed’s efforts were futile when the industry dropped on March 10, 2000. Without actions taken by Greenspan and the Federal Reserve, the drop would have been much more significant.
The housing “bubble” that caused the economic crisis of 2008 was mainly due to de-regulation and irresponsible lending. This was made possible by low interest rates and lack of regulation. These two...