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See Also

See Also in This Set

Warren Buffett

George H. W. Bush

Business and the economy in the United States

Dot-coms

Recession of 1990-1991

Stock market

The 1990s in America

Alan Greenspan

by Rikard Bandebo

Identification American economist and chairman of the Board of Governors of the Federal Reserve system, 1987-2006

Greenspan was the longest-serving chairman of the Federal Reserve, serving throughout the decade of the 1990’s and steering the economy through one of the longest bull markets in living history into what became the dot-com bubble.

Alan Greenspan began the 1990’s in his third year as chairman of the Federal Reserve, which made him arguably the single most influential force on the U.S. financial markets. The Federal Reserve sets the federal fund rate, which affects the rate at which banks can borrow from each other, which in turn influences the prime rate (typically 3 percent higher than the federal rate).

Alan Greenspan.

ph_Greenspan.jpg

(AP/Wide World Photos)

In 1991, Greenspan was faced with a scandal at Salomon Brothers, whose bond-trading division under the leadership of the notorious John Meriwether was caught submitting false bids to the U.S. Treasury. As a consequence, the federal government was about to withdraw Salomon’s trading privileges, which would have led to bankruptcy. However, after a direct appeal from Warren Buffett, Salomon’s largest investor, Greenspan spared the bank this fate. In 1992, Greenspan was elected to his second term as chairman of the Federal Reserve after being nominated by George H. W. Bush. Despite his Republican background, Greenspan was reelected in 1996 and 2000 by the Bill Clinton administration.

Greenspan is renowned for his goal of zero inflation. In 1994, when he was engineering a series of interest-rate increases, he was subjected to much criticism for being willing to sacrifice economic growth in pursuit of this unobtainable goal. However, in 1998 inflation hit an eleven-year low, unemployment was at a twenty-four-year low, and consumer confidence was higher than any other period in the past three decades.

The following year, he crossed paths with John Meriwether again, who at this time was running Long-Term Capital Management. The hedge fund was facing a liquidity crisis, having lost $4.6 billion in less than four months. The fund was one of the largest of its kind, and it was feared that its collapse could have triggered a stock market crash. Greenspan intervened and brokered a deal with the creditors. Subsequently, the stock market continued to climb and culminated in the stock market crash in 2000, bursting the dot-com bubble. Many have come to blame Greenspan for his intervention, believing that a stock market correction in 1998 would have prevented the crash of 2000.

Greenspan also served on the boards of many companies, including Alcoa, Automatic Data Processing, Capital Cities/ABC, General Foods, J. P. Morgan, Morgan Guaranty Trust Company of New York, Mobil Corporation, and the Pittston Company.

Impact

Greenspan was often cited as being the second most powerful man in the United States during the 1990’s after the president. His monetary policy led to the longest sustained bull market in recent history and a housing boom across North America.

Further Reading

1 

Greenspan, Alan. The Age of Turbulence: Adventures in a New World. New York: Penguin Books, 2007.

2 

Hartcher, Peter. Bubble Man: Alan Greenspan and the Missing Seven Trillion Dollars. New York: W. W. Norton, 2006.

3 

Martin, Justin. Greenspan: The Man Behind Money. Cambridge, Mass.: Perseus Books, 2001.

Citation Types

Type
Format
MLA 9th
Bandebo, Rikard. "Alan Greenspan." The 1990s in America, edited by Milton Berman, Salem Press, 2009. Salem Online, online.salempress.com/articleDetails.do?articleName=1990_1240.
APA 7th
Bandebo, R. (2009). Alan Greenspan. In M. Berman (Ed.), The 1990s in America. Salem Press. online.salempress.com.
CMOS 17th
Bandebo, Rikard. "Alan Greenspan." Edited by Milton Berman. The 1990s in America. Hackensack: Salem Press, 2009. Accessed December 14, 2025. online.salempress.com.