Alan Greenspan, Who Reshaped the Modern Federal Reserve, Dies at 100
Alan Greenspan, who served five four-year terms as Federal Reserve chairman and fundamentally transformed the central bank's power, mandate, and operating framework, died at the age of 100. Greenspan took the chairmanship in July 1987, inheriting an institution already commanding broad authority under Paul Volcker — a reach documented that same year in the book "Secrets of the Temple" — and proceeded to deepen its reach across domestic markets and international banking.
Alan Greenspan, who served five four-year terms as Federal Reserve chairman and fundamentally transformed the central bank's power, mandate, and operating framework, died at the age of 100. Greenspan took the chairmanship in July 1987, inheriting an institution already commanding broad authority under Paul Volcker — a reach documented that same year in the book "Secrets of the Temple" — and proceeded to deepen its reach across domestic markets and international banking.
From Monetarism to Data Dependence
Greenspan's most consequential policy shift was moving the Fed away from Volcker's monetarism and control of the M2 money supply — a framework some blamed for the depth of the 1982 recession — toward data dependence and federal funds rate targeting. Known as a data geek among peers, Greenspan drew on unconventional indicators including rail car loadings and production tonnage to calibrate the appropriate policy rate. At times he cited commodity price indices, reflecting his origins as a sound money advocate. Financial markets in the 1990s and into the early 2000s came to accept that Greenspan's judgment and data mastery were sufficient guides. Formal inflation targeting would not arrive until 2014.
The Greenspan Put and Emergency Liquidity
Greenspan's tenure established the Fed as a fast, dependable provider of emergency liquidity — a stance markets came to call the "Greenspan put." His first test came quickly: on October 19, 1987, Black Monday, the Dow fell a single-day record 23%. The Fed moved immediately to expand bank reserves, which at the time were a binding constraint on banks' ability to lend and support broker-dealers. The federal funds rate fell the following day and for several days after. By the 1998 and 2000 market crashes, multiple proactive interest rate cuts had become the standard response to financial distress. The 2000 book "Maestro: Greenspan's Fed and the American Boom" captured the era.
International Reach and Institutional Growth
Under Greenspan, the Fed's footprint expanded well beyond domestic monetary policy. He tightened the grip of the chairmanship, participated actively in the Swiss-based Bank for International Settlements, and approved the international banking standards embedded in the Basel accords. He nearly doubled the Washington, D.C., staff to more than 3,000 people.
An Unresolved Foundation
Greenspan retired from the Fed in 2006. He had advocated for the Fed paying interest to banks on reserves — a policy that became law sooner than expected during the 2008 financial crisis. The Fed's powers have since extended to bond buying, a standing repo facility that lends to primary dealers and approved banks at the discount rate, expanded regulatory mandates, and a commitment to maintaining ample bank reserves that grow with the economy. Writing in an assessment of Greenspan's legacy, former Treasury Undersecretary David Malpass argued that the central question Greenspan spent two decades exploring — whether price stability is better achieved through data-based neutral-rate judgments, inflation data, or forward-looking price rules — remains open, and falls to the current Fed and its chairman, Kevin Warsh, to resolve.