The Man Who Knew: The Life and Times of Alan Greenspan — Sixteen: LIGHT BLACK MONDAY

1. 1. Greenspan called Ken Duberstein to ask Nancy Reagan if he could bring Andrea Mitchell to a state dinner, as the first lady disapproved of unmarried couples at formal events.
2. 2. On October 14, 1987, Greenspan escorted Andrea Mitchell to her first White House state dinner, where she wore an Oscar de la Renta gown that 'almost broke the bank.'
3. 3. Treasury Secretary James Baker criticized Germany's Bundesbank for raising interest rates, saying the U.S. would not watch surplus countries squeeze growth worldwide.
4. 4. Greenspan told Reagan that the market's fall was 'an overdue correction,' disagreeing with Beryl Sprinkel's view that the Fed was too tight.
5. 5. Greenspan was aware of financial fragility from discussions with New York Fed President Gerald Corrigan, who warned of dangers from the buildup of debt.
6. 6. Greenspan asked Fed staff how to deflate the stock market bubble gently, but they offered only two uncertain options: raise rates or give a speech warning of overvaluation.
7. 7. On Black Monday, October 19, 1987, the Dow dropped 508 points, a 22.6% loss, the largest single-day decline in history.
8. 8. Greenspan insisted the Fed issue a short statement promising liquidity, overruling a longer legalistic draft, after Corrigan argued for brevity.
9. 9. Corrigan called major bank chiefs to urge them to keep lending, using a mix of charisma and menace, which proved crucial in preventing a systemic collapse.
10. 10. The White House pressured Wall Street firms to buy stocks, with Howard Baker and the Reagan team calling contacts to support the market.
11. 11. Greenspan cut the federal funds rate from over 7.5% to about 6.75% after Black Monday, fearing the crash would slow the economy, but growth surged to 6.8% in Q4 1987.
12. 12. The 1987 crash led Greenspan to abandon his earlier Randian belief that financial crises should be allowed to discipline markets, instead arguing that central-bank rescues were desirable.