Alan Greenspan Dies at 100: The Fed Chief Who Started Protecting Wall Street

Former Federal Reserve boss Alan Greenspan has died. His habit of rescuing markets created a risky legacy that still shapes the Fed today.

Alan Greenspan, one of the most powerful figures in modern finance, has died at age 100. He led the U.S. Federal Reserve (the Fed — America's central bank that controls money and interest rates) for nearly 20 years, leaving behind a legacy that experts still debate today.

Why does he matter? Greenspan is remembered for a key shift: he made the Fed quick to rescue financial markets whenever they got into trouble. This idea became known as the "Greenspan put" — a put is a type of financial protection, so the term means investors believed the Fed would always step in to save them if their risky bets went bad.

This pattern began right after he took charge in 1987:

On October 19, 1987 ("Black Monday"), the Dow Jones (an index tracking 30 big U.S. company stocks) crashed 22% in a single day.
The next day, Greenspan promised the Fed would provide "liquidity" (easy access to cash) to keep markets running.
Markets quickly recovered — but critics say this taught traders they'd always be bailed out.

The downside: "moral hazard." This term means that when people know they'll be rescued, they take bigger, riskier gambles. Economists argue that constantly saving markets encourages dangerous behavior.

Greenspan's biggest mistake came near the end of his career. He ignored warnings about a housing bubble (when home prices rise far above their true value) and acted as a "cheerleader" for the market. When it collapsed in 2008, it triggered a global financial crisis. Greenspan later admitted to Congress that he had been wrong.

This pattern continues today:

In 2023, the Fed rushed to protect deposits at two failed banks (Silicon Valley Bank and Signature Bank).
The new Fed chair, Kevin Warsh, who took over in May, may soon face similar tough choices as the Fed appears ready to raise interest rates to fight inflation (rising prices).

In short: Greenspan shaped how the Fed works for decades, but his instinct to protect markets created problems that still challenge central bankers today.

This is an AI-generated summary. Read the original article at: https://www.marketwatch.com/story/former-federal-reserve-chairman-alan-greenspan-dies-a7a4030d?mod=mw_rss_topstories