Although I am not aware any statues of Alan Greenspan being toppled by irate crowds, the former chairman of the Federal Reserve has certainly fallen from a lofty perch.

Once hailed as the “greatest central banker that ever lived,” Greenspan today justifiably occupies a much more modest legacy, such as “greatest central banker who played the saxophone.”

Greenspan’s champions point to his forceful actions during:

* The 1987 stock market crash.

* The long-term capital debacle.

* The recession after the Sept. 11, 2001, terrorist attacks.

Greenspan, who was Fed chairman from 1987 to 2006, held that position during the tenure of four presidents — Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush. Unfortunately, many of his critics feel that he squandered his incumbency.

Greenspan retorted in a recent interview with business cable network CNBC that he had “no regrets” about Fed policy conducted during his tenure and that the central bank could have done only little to avert the U.S. housing crisis.

Greenspan’s critics complain that he:

  • Failed to speak out when he saw problems.
  • Failed to take remedial action.
  • Failed to champion controversial legislation that could have circumscribed the activities of mortgage issuers.
  • Employed obtuse language to purposely confuse his listeners.

John Taylor, the Treasury Department’s top international hand from 2001 to 2005, accused Greenspan of keeping interest rates so low that it led to overheated housing prices and set the stage for a bust. We should note that after the 9/11 terrorist attacks, the Fed began cutting the federal funds rate until it hit 1 percent and kept it low for several years, long after the economy showed signs of rebounding.

Greenspan rejected advice to raise the rate even after other Fed governors pointed out that the problem of increasing inflationary pressures was greater than the problem of the economy slipping back into recession

Paul Krugman, a leading economist at Princeton, wrote a scathing editorial, called “Sad Alan’s Lament,” in The New York Times on Sept. 17.

Krugman noted that Greenspan approved fully the Bush 1991 tax cut. Krugman pointed out that in both 1991 and 1994, Greenspan testified before Congress that he approved “tax cuts” to stimulate the economy. Moreover, Greenspan forecast incorrectly that these tax cuts would not convert the Clinton era surplus to deficits.

Greenspan’s comments in his recent television interviews that while he favored “tax cuts,” he did not favor the Bush “tax cuts” has raised more than a few eyebrows.

Most economists believe that the large deficit during the Bush tenure increased inflationary pressures because “too many dollars are chasing the available quantity of goods.”

Greenspan, an outspoken champion of free trade, turned a blind eye to the negative impact from our mounting debt to foreigners.

His critics charge that our enormous trade deficits led to a weak dollar. A weaker dollar in turn adds to inflationary pressures because we are paying more for imports. Currently, the dollar is at record lows against the euro, the Chinese yuan and the Swiss franc.

Greenspan helped facilitate today’s housing problem.

He brushed off warnings by Edward M. Gramlich, a member of the Federal Reserve board, about deceptive lending practices that facilitated homeownership. Gramlich urged the Federal Reserve to investigate the problem and take appropriate action. Greenspan stonewalled any remedial steps, saying that “investigating the problem” would be too burdensome for his agency.

During his heyday, Greenspan blithely rejoiced over the increased percentage of Americans who owned homes. The 2 million Americans now facing home eviction in 2008 and the 3 million other Americans facing serious mortgage repayment problems might not jump up and down over Greenspan’s exhortations.

Greenspan could have increased the margin requirements on all stocks to forestall speculative Internet binges of the late 1990s.

Instead, he neither took action nor spoke out against the Internet bubble when these stocks attained very high and unrealistic price levels. Unlike Greenspan, Warren Buffett, during that same time period, warned repeatedly that we were facing an Internet stock bubble.

I believe that Greenspan’s tenure as Fed chairman will be seen as mediocre because his policies contributed to inflation, the Internet stock collapse and the subprime mortgage problem.

Originally published in the Sarasota Herald-Tribune