Times Downplays Greenspans 18-Year Success
Paper dwells on danger if
housing turns into a bubble that bursts.
Alan Greenspan might well be the best
central banker who ever lived. That statement, from the August 26
New York Times, reflects the attitude of even most Greenspan critics
except for the Times.
The Times looked back on the Greenspan tenure as
Federal Reserve Chairman by emphasizing a threatened housing
bubble that Greenspan doesnt even believe in. Reporter Edmund L.
Andrews characterized a Fed chairman washing his hands of a looming
threat. If housing prices do turn out to be a bubble that bursts,
said Andrews, Mr. Greenspan will no longer be around to take the
blame or clean up the mess.
The article, The Doctrine Was Not to Have One,
described Greenspan as a classic free market supporter who has been
wildly successful in his job. Rather than emphasize that, Andrews
undercut him as a man leaving a brilliant record but a murky
legacy. The problem? The fact that it will be difficult for a
successor who faces a near-impossible task in replicating
Mr.Greenspans success in managing monetary policy, said Andrews.
Many of the more than 2,000 words were devoted to talk
of a looming housing bubble. But a quick search of the Times own
archive shows that Greenspan disagrees with that entire premise. In
a May 31 piece, he explained the situation. Mr. Greenspan
acknowledged that housing prices showed signs of froth. Though he
remained skeptical about the existence of a nationwide housing
bubble, he said there were signs of lots of little bubbles in
particular local markets.
Despite that, Andrews hammered home the potential
bubble in housing prices today. In an article that was far from
complimentary, he added: But for all his triumphs, Mr. Greenspan
also presided over a stock market bubble that burst and, in helping
minimize the damage from that fiasco, laid the groundwork for the
housing boom and potential bust that followed.
Buried in the piece were a few key points about the
Greenspan tenure:
- Reagan success: Greenspans success can be traced
back to Ronald Reagan, who nominated him in 1987 18 years
ago.
Atlas Shrugged: According to Andrews, Greenspan is a devout believer in free markets and at one time a disciple of Ayn Rand, the libertarian philosopher. The story made no attempt to link those points with Greenspans storied success.
Strong economy: More from Andrews on the excellent Greenspan years: The core rate of inflation has edged down to about 2 percent from 4 percent when he took office. Unemployment has averaged 5.5 percent over the last 18 years, compared with nearly 7 percent in the previous 18 years, and it is now down to about 5 percent.
Krugman chaos: Readers of Times economist Paul Krugman will recognize the articles major point from a May 27 Krugman column. That column quoted various pro-bubble advocates including one who predicted that the Federal Reserve would simply replace one bubble with another. According to Krugman, That's why it's so ominous to see signs that America's housing market, like the stock market at the end of the last decade, is approaching the final, feverish stages of a speculative bubble. Now heres Andrews from the latest article: The biggest risk for his successor could turn out to be a collapse in housing prices after the frenetic run-up that has resulted in part from the Feds policy of keeping interest rates so low.
If only: Even though Greenspan has enjoyed great success, the story dwelled on critics who contend that he has relied too heavily on his own judgment and not enough on consistent principles. Andrews then concocted a what if scenario that one critic said that the Fed might have avoided much of the volatility since 2000.
