The Man Who Knew: The Life and Times of Alan Greenspan

by Sebastian Mallaby

Overview

“Exceptional . . . Deeply researched and elegantly written . . . As a description of the politics and pressures under which modern independent central banking has to operate, the book is incomparable.” —Financial Times

The definitive biography of the most important economic statesman of our time, from the bestselling author of The Power Law and More Money Than God
 
Sebastian Mallaby's magisterial biography of Alan Greenspan, the product of over five years of research based on untrammeled access to his subject and his closest professional and personal intimates, brings into vivid focus the mysterious point where the government and the economy meet. To understand Greenspan's story is to see the economic and political landscape of our time—and the presidency from Reagan to George W. Bush—in a whole new light. As the most influential economic statesman of his age, Greenspan spent a lifetime grappling with a momentous shift: the transformation of finance from the fixed and regulated system of the post-war era to the free-for-all of the past quarter century. The story of Greenspan is also the story of the making of modern finance, for good and for ill. 
 
Greenspan's life is a quintessential American success story: raised by a single mother in the Jewish émigré community of Washington Heights, he was a math prodigy who found a niche as a stats-crunching consultant. A master at explaining the economic weather to captains of industry, he translated that skill into advising Richard Nixon in his 1968 campaign. This led to a perch on the White House Council of Economic Advisers, and then to a dazzling array of business and government roles, from which the path to the Fed was relatively clear. A fire-breathing libertarian and disciple of Ayn Rand in his youth who once called the Fed's creation a historic mistake, Mallaby shows how Greenspan reinvented himself as a pragmatist once in power. In his analysis, and in his core mission of keeping inflation in check, he was a maestro indeed, and hailed as such. At his retirement in 2006, he was lauded as the age's necessary man, the veritable God in the machine, the global economy's avatar. His memoirs sold for record sums to publishers around the world.
 
But then came 2008. Mallaby's story lands with both feet on the great crash which did so much to damage Alan Greenspan's reputation. Mallaby argues that the conventional wisdom is off base: Greenspan wasn't a naïve ideologue who believed greater regulation was unnecessary. He had pressed for greater regulation of some key areas of finance over the years, and had gotten nowhere. To argue that he didn't know the risks in irrational markets is to miss the point. He knew more than almost anyone; the question is why he didn't act, and whether anyone else could or would have. A close reading of Greenspan's life provides fascinating answers to these questions, answers whose lessons we would do well to heed. Because perhaps Mallaby's greatest lesson is that economic statesmanship, like political statesmanship, is the art of the possible. The Man Who Knew is a searching reckoning with what exactly comprised the art, and the possible, in the career of Alan Greenspan.

Product Details

ISBN-13:	9780143111092
Publisher:	Penguin Publishing Group
Publication date:	12/05/2017
Pages:	800
Sales rank:	669,931
Product dimensions:	5.40(w) x 8.20(h) x 1.80(d)

About the Author

Sebastian Mallaby is the author of several books, including The Power Law, More Money Than God, The Man Who Knew, and The World's Banker. A former Financial Times contributing editor and two-time Pulitzer Prize finalist, Mallaby is the Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations.

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Table of Contents

Preface xi

Introduction: "He Has Set a Standard" 1

Book I The Ideologue

1 The Feeling of a Conqueror 13

2 The Un-Keynesian 26

3 The Rebirth of Money 39

4 Ayn Rand's Undertaker 58

5 Against the New Frontier 76

Book II The Politician

6 A Libertarian for Nixon 101

7 Do-Nothingism 128

8 "A MINORITY OF ONE" 155

9 Between Thatcher and Kissinger 178

10 The First Housing Conundrum 208

11 Republican Dreamers 228

12 "Do We Really Need the Fed?" 255

13 A Republican Volcker 282

14 Without the Cigar 305

Book III The Central Banker

15 "Greenspan's Irrelevant" 327

16 Light Black Monday 340

17 The Gun-Shy Chairman 365

18 "You're the Big Guru" 391

19 Maestro 418

20 Alan Versus Alan 446

21 The Zipswitch Chairman 465

22 Irrational Exuberance 482

23 "The Best Economy I've Ever Seen" 509

24 "Uncle Alan Will Take Care of Us" 528

25 Alan.Com 549

26 "A Very Surreal Environment" 569

27 Lowflation 593

28 The Four Winds 615

29 "I Found a Flaw" 648

Conclusion: The Blind Roller Skater 672

Acknowledgments 687

Appendix: The Greenspan Effect 691

Notes 695

Image Credits 757

Index 759

Editorial Reviews

An impressive achievement and an important piece of scholarship that both deserves and rewards the careful reader . . . A brilliant rendering of key moments in recent economic and financial history that provides the context needed to appreciate Greenspan’s extraordinary mixed legacy.” —Peter Fisher, International Finance

“Highly recommended . . . anyone with an interest in postwar U.S. economic and political history will enjoy The Man Who Knew.” —Ben Bernanke

“While Greenspan was (and is) a more capable economist than he gets credit for these days, he was an even better politician . . . This view of Greenspan as a political animal is central to Mallaby’s account. It is also, along with the often amusing depictions of Greenspan’s personal life, what makes it so much fun to read . . . [An] excellent biography.” —New York Times Book Review

“Mallaby’s masterful biography—which doubles as an excellent economic history of the past three decades—tells a story of Greenspan’s technocratic ascent, from his modest boyhood in New York City, to a young adulthood colored by his philosophical attraction to the antigovernment libertarianism of the novelist Ayn Rand, to his career as a high-flying economic consultant, and finally to his rise to the pinnacle of power at the Fed.” —Foreign Affairs

“A rock-star central banker emerges in all his contradictions in Sebastian Mallaby’s fine biography. . . . Deeply researched and elegantly written. . . . [An] exceptional new biography.” —Financial Times

“A tour de force—the most deeply reported work on the dry art of central banking since William Greider’s “Secrets of the Temple” (1988). But Greider’s work was flawed because he pushed his reporting through a meat grinder of questionable economic theories. Mallaby avoids that pitfall. Much like the man he profiles, Mallaby shows a solid understanding of competing economic—and political—theories, without tying himself inextricably to any one.” —The Washington Post

“The Man Who Knew is a tour de force, the story not just of Alan Greenspan’s career but equally of America’s economic triumphs and failures over five decades. This carefully researched and elegantly written book will be essential reading for those who aspire to make policy and for anyone who wants to divine what drives the choices that our leaders make.” —Wall Street Journal

“In a superb new book, the product of more than five years’ research, Sebastian Mallaby helps history make up its mind about Alan Greenspan, the man hailed in 2000 by Phil Gramm, a former senator, as ‘the best central banker we have ever had,’ but now blamed for the financial crisis of 2007-08.” —The Economist  

“Exceptional . . . Deeply researched and elegantly written . . . As a description of the politics and pressures under which modern independent central banking has to operate, the book is incomparable.” —Financial Times

“Mallaby pulls back the curtain on the controversial Fed chairman . . . and takes a fresh look at his record.” —Esquire

“Economics is dubbed the dreary science, but as this comprehensive and absorbing biography reveals, economists can certainly enjoy lively and interesting lives. . . . Mallaby strives to fairly consider Greenspan’s successes and failures in this balanced account. . . . A portrait of a many-faceted and brilliant man far more appealing than the stolid technocrat who appeared before Congress and the public during his long tenure (1987–2006) as chairmanof the Federal Reserve.” —Booklist

“Thorough, balanced, and well informed . . . A masterful, detailed portrait of one of the leading economic figures of our time.” —Publishers Weekly

“The astonishing story of  how a solitary young man, who found solace in numbers, became the world’s most powerful economic decision-maker, presiding over the revolution in finance that touches everyone.  With judgment and authority, The Man Who Knew takes us inside the great economic crises of our times—and provides insight for the crises and turmoil yet to come.” —Daniel Yergin, author of The New Map and The Quest

“One of the best books I’ve read recently isn’t out until October. It is a biography of Alan Greenspan titled, The Man Who Knew: The Life and Times of Alan Greenspan. Mr. Greenspan is a fascinating subject because for so long he was considered a genius, only to later be blamed for the financial crisis. Mr. Mallaby does an exquisite job going beyond these two versions of the Greenspan narrative and taking the reader inside the complicated mind of a man who may have had one of the largest ever influences over our economy.” —The New York Times

“A masterful biography of Alan Greenspan, full of astute insights and deft judgments about the career of one of the most consequential, and yet enigmatic, economic statesman of our era, a book that provides a unique and fascinating window into the major economic policy debates of the last 50 years.” —Liaquat Ahamed, Pulitzer-Prize winning author of Lords of Finance: The Bankers Who Broke the World

"Mallaby has a rare ability to blend the stories of powerful people with insights into influential institutions and formidable policy challenges. The Man Who Knew is a superb biography—as well as an economic history, political profile, and monetary policy primer. Careful research, fine writing, an intriguing narrative, and a cautionary tale: This book has it all.” —Robert B. Zoellick, Former President of the World Bank, US Trade Representative, and US Deputy Secretary of State

“A fascinating and balanced study of arguably the most important figure of the post-war global financial scene.” —Mervyn King, Former Governor of the Bank of England and Chairman of its Monetary Policy Committee 

“Admire him or despise him, Alan Greenspan was the preeminent financial statesman of the post-war era. But Sebastian Mallaby’s magisterial biography casts him as something more (and more intriguing) than that: a masterly and mesmerizing politician. Whether counseling Richard Nixon on the race-freighted Southern strategy, scheming with Watergate felon Charles Colson on a plan to neuter the Federal Reserve’s independence, or waging bureaucratic war against Henry Kissinger (and winning!), Greenspan was cunning, stealthy, and ruthless, neck deep in the political intrigues of his era—less the bloodless monetary technocrat of lore than the J. Edgar Hoover of economics. In riveting, page-turning fashion, The Man Who Knew reveals the man in full.” —John Heilemann, managing editor of Bloomberg Politics, host of With All Due Respect, author of Game Change and Double Down

“A splendid biography—compelling, readable, provocative, richly researched, brimming with authorial intelligence. A rich, subtle portrait of a complex and surprisingly vulnerable human being. The Man Who Knew is a courageous book, for it reckons with Greenspan’s shortcomings with unbridled honesty. Its judgments are all the more devastating because Mallaby is scrupulously fair, as unafraid to praise as he is to critique. And as he leads us through the passages of Greenspan’s life, Mallaby takes us on a tour of the sizzling financial dramas and of the great intellectual debates of the postwar years, from the inflation agonies of Gerald Ford to the mortgage bubble of the early 2000s. The Man Who Knew will surely become the definitive Greenspan biography.” —Roger Lowenstein, author of America’s Bank: The Epic Struggle to Create the Federal Reserve, and When Genius Failed.

From the Publisher

…[an] excellent biography…[The] view of Greenspan as a political animal is central to Mallaby's account. It is also, along with the often amusing depictions of Greenspan's personal life, what makes it so much fun to read. In his autobiography…Greenspan depicted his rise to power as a series of lucky coincidences. Mallaby describes in detail how Greenspan climbed to the top, and it's a much more interesting story. It is not heroic like the biographies of 19th-century business titans that Greenspan read when he was young. It is instead an archetypical second-half-of-the-20th-century tale of a young man of modest means rising to lofty status in business and in government by dint of intelligence, diligence, quirky charm and a Machiavellian streak. Greenspan comes across in these pages…as a decent, thoughtful, likable guy. Just not as an innocent, and also not as a hero.

The New York Times Book Review - Justin Fox

08/15/2016
Alan Greenspan, who served as chairman of the Federal Reserve from 1987 to 2006 (the second longest tenure in history), is revealed in this biography to have been neither the fabled maestro who mastered inflation nor the reviled incompetent who failed to anticipate the Great Recession. According to Mallaby (More Money than God), a Financial Times contributing editor, he was a formidable analyst and forecaster, but one whose laissez-faire philosophy allowed unregulated derivatives and “shadow banking” to proliferate and culminate in the 2008 financial crisis. Mallaby also explores one of Greenspan’s less appreciated talents, possibly the one where his real genius lay: a canny instinct for political survival. Mallaby’s treatment of Greenspan’s life is thorough, balanced, and well-informed (due no doubt in part to Greenspan’s cooperation). A less judicious (or more commercially minded) biographer might be tempted to dwell on Greenspan’s recent, and sensational, fall from grace, but Mallaby is careful to give each season of Greenspan’s life its proportional weight. He has written a masterful, detailed portrait of one of the leading economic figures of our time. Agent: Andrew Wylie, Wylie Agency. (Oct.)

Publishers Weekly

10/01/2016
Over the course of many decades, respected American economist Alan Greenspan (b. 1926) has been a leading advisor to top government officials, including U.S. presidents. Greenspan's influence has shaped modern monetary and economic policymaking, especially from 1987 to 2006, when he served as chair of the Federal Reserve Bank. In this role, Greenspan determined U.S. monetary policies and was successful at keeping inflation rates low while modern financial systems were continually evolving. Mallaby (Paul A. Volcker Senior Fellow for International Economics, Council on Foreign Relations; More Money Than God) consulted extensively with Greenspan to write this book. To aid in the analysis is an appendix with five graphs entitled "The Greenspan Effect." During economic events such as bubbles bursting, crashes, recessions, and terrorism, Greenspan displayed perseverance, resiliency, and the foresight needed to weather these storms. The biography also delves into his childhood and young adult years and shows how he developed this inner strength along with economic acumen and visionary leadership. VERDICT This engaging work draws readers into an honest examination of how well Greenspan maintained economic stability and circumvented crises.—Caroline Geck, Somerset, NJ

Library Journal

2016-07-31
The life of perhaps the wonkiest financial theorist to sit at the helm of the Federal Reserve.Alan Greenspan (b. 1926) is infamous for having led the government’s chief financial institution in the years when all the perfect-storm conditions were setting up for the economy to tank and for, at least until that collapse, pressing an Ayn Rand–derived libertarian case whenever he could. Financial journalist Mallaby (More Money than God: Hedge Funds and the Making of a New Elite, 2010, etc.) offers correctives and nuances to this view in this not uncritical portrait. As a math whiz kid with an interest in politics, Greenspan held a cautious contempt for the gray mass culture of the 1950s, “despite his eagerness to share in the prosperity it brought.” While he played golf and drove nice cars, sure, he also came to a rightist critique that turned, as Mallaby writes, on his membership in “a fringe group that was one part libertarian salon, two parts strange cult,” namely the circle around the Russian egotist Rand and its embrace of a particularly austere brand of logical positivism. Greenspan’s ideological purity did not preclude him from mixing in society—he dated Barbara Walters, after all—but it certainly seemed to reinforce an otherworldliness that prized theory over reality. In matters economic, Mallaby writes, Greenspan urged a kind of limited-government, free-market vision that rested uneasily with the close management required of the Fed. In that role, Greenspan took risky positions, including a complacent view of the housing bubble; after all, “subprime lending and mortgage securitization had been around for years without triggering a catastrophe,” though catastrophe is what ensued on his watch. Even so, as Mallaby closes by noting, Greenspan was not wholly averse to regulation, made financial calls that were seen as sound at the time, and may not have been able to ward off a crisis that was many years in the making. A well-crafted, thorough biography sure to interest students of the modern economy and financial system.

Kirkus Review