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The Life and Legacy of Alan Greenspan, A Conversation with Author and Journalist Sebastian Mallaby

November 15, 2016
On November 15th, Penn Wharton PPI welcomed Sebastian Mallaby for a discussion of his recently-released book, The Man Who Knew: The Life and Times of Alan Greenspan. Faculty Affiliate Peter Conti-Brown, Assistant Professor of Legal Studies and Business Ethics at Wharton, moderated the conversation.

Alan Greenspan, the former Chairman of the Federal Reserve, was once hailed as the omnipotent “maestro” of the U.S. economy, but his reputation suffered in the aftermath of the 2008 financial crisis. Mallaby’s new biography is based on five years of research and unmatched access to Greenspan. It presents a nuanced assessment of one of the most influential economic statesmen of the twentieth century and issues a warning about the future of finance.

“The book takes us on a magisterial tour of the second half of the 20th century in finance and politics,” began Professor Conti-Brown, a financial historian himself specializing in the history of the Federal Reserve. He noted that Mallaby’s book moves in three stages, examining Greenspan as an ideologue, politician, and central banker in turn. When asked what drew him to write this biography, Mallaby recounted that in 2010, after finishing More Money Than God: Hedge Funds and the Making of a New Elite, Alan Greenspan cited the book in a paper he had written on the 2008 Financial Crisis. At the same time, Mallaby was looking for a way to write a big sweep of the history of finance, and explore how, “a bunch of intelligent people came up with a financial system that blew up so spectacularly in 2008.” Greenspan was the person who was at or near the center of this process since the late 1960s, making him Mallaby’s perfect candidate.

This biography is authorized, and written with Greenspan’s full cooperation, however Mallaby insisted that this placed no limits on the expression of his opinion. “I am capable of talking a lot to somebody and calling it as I see it,” he said. “We had a deal: I would get lots of access, but Greenspan had no rights over the book.” In the end, Greenspan himself, after reading the manuscript, said that the book, “was not positive, but accurate.”

Throughout the conversation, dichotomies and tensions in Greenspan’s life emerged as a common theme. His desire for power and influence was often paired with his need to accommodate himself to the system as he discovered it, exposing many contrasts in his political, economic, and personal life. Mallaby insists that rather than being branded as a hypocrite, Greenspan is “realpolitik.”

Professor Conti-Brown mentioned another tension in his personality – between his “undertaker bearing and somber, menacing look” while being “surrounded by glamour at the center of a high octane political world.” Mallaby explained that Greenspan was, “devastatingly charming one on one.” This political influence served Greenspan well in Washington, where his savvy and ability to leak the Fed’s movements to the press enabled him to maintain his position of high influence for years.

Another theme explored in the book was Greenspan’s relationship to economics. Conti-Brown noted that his, “love of statistics and insatiable demand for figures highlighted his fundamentally incompatible view of economics in the last 30 years.” Greenspan was almost a self-taught economist, going against the grain of what economics has become, especially since the data he sought, “existed almost untethered from the world of economic modeling.” Mallaby agreed, explaining that before the crisis, Greenspan didn’t agree with models as a real way of thinking, and that the financial crisis seemed to confirm that markets are not perfectly efficient.

Professor Peter Conti-Brown and Sebastian Mallaby

After writing this book, Mallaby concluded that globalization and technological change had computerized finance and made it difficult for regulations to stick in international markets. This ultimately led to the advent and takeoff of securitization and the creation of complex derivatives. Unfortunately, in, “America’s alphabet soup of regulatory industries, it was too difficult to coordinate everybody around a plan and jam that through congress.” Greenspan, “didn’t have the stomach for a political fight, and was crushed when he tried to limit Fannie Mae and Freddie Mac.”

Ultimately, Mallaby’s examination of Greenspan as a political mastermind who made himself indispensable to many Presidential administrations provides an interesting takeaway about success in American politics: a technocrat can be powerful if they understand power and are unafraid to wield it.

The Man Who Knew has been shortlisted for the 2016 Financial Times and McKinsey Business Book of the Year Award.

About the Speaker: Sebastian Mallaby is Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations. An experienced journalist and public speaker, Mallaby is also a contributing columnist for the Washington Post, where he previously served as a staff columnist and editorial board member. His interests cover a wide variety of domestic and international issues, including central banks, financial markets, the implications of the rise of newly emerging powers, and the intersection of economics and international relations. His writing has also appeared in the Atlantic and the Financial Times, where he spent two years as a contributing editor.

Before joining the Washington Post in 1999, Mallaby spent thirteen years with the Economist. Between 1997 and 1999, he was the Economist’s Washington bureau chief and wrote the magazine’s weekly Lexington column on American politics and foreign policy. He is a two-time Pulitzer Prize finalist: once for editorials on Darfur and once for a series on economic inequality.

PENN WHARTON PPI
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