The Man Who Knew: The Life and Times of Alan Greenspan — Twenty-nine: “I FOUND A FLAW”

1. 1. Greenspan left office in January 2006 amid adulation, receiving the Presidential Medal of Freedom and a farewell party at the Fed.
2. 2. After retiring, Greenspan earned $250,000 for a single speech at Lehman Brothers, more than his annual salary as Fed chairman.
3. 3. Greenspan recognized the housing bubble in his last months but did little to stop it, believing the benefits of broadened home ownership were worth the risk.
4. 4. By summer 2007, house prices fell 5%, subprime delinquencies rose, and Bear Stearns hedge funds collapsed, signaling the onset of the financial crisis.
5. 5. In December 2007, Greenspan argued the Fed could not have prevented the bubble without 'breaking the back of the economy,' a claim many economists rejected.
6. 6. In March 2008, Greenspan defended market self-regulation in the Financial Times, but Bear Stearns collapsed the same day, undermining his argument.
7. 7. Greenspan endorsed Treasury Secretary Paulson's plan to rescue Fannie Mae and Freddie Mac in July 2008, even suggesting the government buy and burn vacant homes.
8. 8. Greenspan called for a public rescue of Lehman Brothers on September 14, 2008, but Paulson allowed it to fail, triggering a systemic panic.
9. 9. In October 2008, Greenspan testified before Congress and admitted 'I found a flaw' in his belief that markets could self-regulate, a confession that dominated headlines.
10. 10. After the crisis, Greenspan endorsed higher capital requirements, central clearing for derivatives, and breaking up too-big-to-fail banks, but his audience had dwindled.