Former Federal Reserve Chair Alan Greenspan passed away at his home in Washington on Monday at the age of 100, due to complications from Parkinson's disease. His wife, NBC News Chief Washington Correspondent Andrea Mitchell, announced the news. To the global markets, Greenspan was more than just a former central bank chief: he led the Fed for nearly 19 years, witnessing the U.S. go from the 1987 stock market crash to the internet boom, and also facing historical scrutiny for his role in the 2008 financial crisis.

His life almost epitomized the core debates in the U.S. capital markets over the past few decades: whether the market can self-regulate and whether the central bank should proactively deflate bubbles.

Headed the Federal Reserve for Nearly 19 Years, Across Four Presidencies

Greenspan took office as Fed Chair in August 1987 and served until stepping down in January 2006, a tenure of nearly 19 years, making him the second-longest-serving Fed Chair in U.S. history, behind William McChesney Martin.

This period overlapped the presidencies of Reagan, H.W. Bush, Clinton, and W. Bush, as well as the end of the Cold War, the internet boom, accelerated globalization, and the expansion of financial innovation. His ability to receive consecutive appointments from two different parties itself illustrated his unique position between Washington and Wall Street.

During his peak, Greenspan was dubbed the "Maestro." This title was not just a personal accolade but also represented America's strong confidence in technological advancement, free markets, and market efficiency in the 1990s. At that time, the U.S. economy experienced prolonged growth, mild inflation, simultaneous increases in the stock market and productivity, and there was a widespread belief that the central bank could maintain growth and stability without heavy market intervention.

Greenspan's public image was also imbued with a strong technocratic essence. He spoke cautiously and cryptically, yet markets would dissect his speeches word by word, trying to decipher the direction of interest rates. This era of "one sentence from the Fed Chair impacting global markets" reached its peak during his tenure.

From the 1987 Stock Market Crash to 9/11, He Was Seen as a Crisis Helmsman

Shortly after Greenspan took office, he faced his first major test. In October 1987, the U.S. stock market experienced "Black Monday," with the Dow Jones Industrial Average plunging in a single day. The Fed swiftly injected liquidity to support the markets, a move seen as crucial in stabilizing the financial system.

Subsequently, he navigated through the Asian financial crisis, the Russian debt crisis, the Long-Term Capital Management (LTCM) debacle, and the market shocks post the 2001 9/11 attacks. At these junctures, the Fed's liquidity support and interest rate cuts reinforced Greenspan's image as a "crisis manager."

This policy style was later market-wise summarized as the "Greenspan Put," meaning the "Greenspan Put Option." It was not a formal policy but a market expectation: when asset prices plummeted significantly and the financial system was under pressure, the Fed would intervene to provide support. For investors, this expectation reduced panic. However, from another perspective, it could also encourage higher leverage and more aggressive risk-taking.

Greenspan himself was not simply synonymous with "perpetual accommodation." In 1996, he once warned of an "irrational exuberance" in the stock market, a statement that later became a famous phrase in financial history. However, the issue was that the warning did not translate into robust policies to burst asset bubbles. For him, central banks found it challenging to accurately determine when a bubble was forming and difficult to deflate the bubble without harming the real economy.

This assessment seemed practical during the prosperity period but became a controversial starting point after the crisis.

Market-Friendly Philosophy Reexamined Post-2008

Greenspan's policy inclination was market-friendly. He believed market prices could aggregate information, financial innovation could spread risk, overregulation would undermine efficiency. He also long supported free trade, deregulation, and technology-driven productivity enhancements.

This ideology was highly consistent with the economic atmosphere of the United States in the 1990s. After the end of the Cold War, the expansion of globalization and information technology brought massive optimism. Wall Street's financial innovation accelerated, complex derivatives, securitization products, and off-balance-sheet bank activities continued to expand. Before the crisis erupted, these tools were often described as progressing capital allocation efficiency and diversifying financial risks.

However, the 2008 financial crisis altered Greenspan's historical position.

Critics argued that the Fed kept interest rates too low for too long after the bursting of the dot-com bubble and "9/11," fueling an overheated real estate market; regulatory authorities were too lenient on banks and Wall Street's risk expansion, failing to restrict the proliferation of mortgage-backed securities, leverage, and complex financial products; the central bank, aware that asset prices might deviate from fundamentals, was unwilling to directly confront the bubble.

These criticisms do not imply that the 2008 crisis can be attributed to Greenspan alone. The causes of the crisis include regulatory structures, financial institutions' incentives, rating systems, housing policies, global capital flows, and multiple factors. However, as the most influential monetary policy maker and representative of free-market ideals before the crisis, he inevitably became the center of controversy.

In his later years, Greenspan defended his policy legacy. He acknowledged the flaws in assessing financial institutions' self-restraint capabilities but also emphasized that bubbles are often challenging to identify when forming, and policymakers cannot grasp the full picture of a crisis in advance.

His Legacy, Straddling Two Eras

The reason Greenspan's passing continues to attract global market attention is that the debates surrounding him have not faded with time.

In the eyes of his supporters, he was the central bank helm during America's prolonged prosperity, maintaining financial system stability through multiple external shocks and helping the U.S. economy navigate a crucial period from high inflation memories to low inflation growth. Without the Greenspan era, it is challenging to grasp the optimism in the U.S. capital markets in the 1990s and global investors' trust in the Fed.

In the eyes of his critics, he was also a symbol of the era of financial laissez-faire. Low interest rates, light regulation, and faith in the market's self-correcting ability eventually revealed their cost in the housing bubble, subprime crisis, and global financial imbalances. Post-2008, the Fed and the U.S. regulatory system moved towards stronger regulation and larger-scale interventions, to some extent, a backlash against the Greenspan era.

Here lies the complexity of Greenspan's legacy: he was neither merely a prosperity builder nor can he be simply vilified as the root of crises. He represented an era that believed in the continuous improvement of economic operations through markets, technology, and financial innovation; yet, the conclusion of this era compelled the world to rethink the boundaries between central banks, regulation, and markets.

For today's investors, Greenspan's passing is not just a historical footnote. Whenever the market bets on the Fed turning accommodative amid a crisis, whenever asset prices rise amid financial stability risks, the issues of the "Greenspan era" resurface: Is the central bank stabilizing the market or encouraging the next round of risk buildup? This question still lacks a definitive answer.

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