Stephen Holmes writes:
Among the once celebrated triumphs of Alan Greenspan’s eighteen and a half years as chairman of the Federal Reserve, three stand out. First, he responded nimbly and forcefully to a series of dangerous crashes (from Black Monday in October 1987 to the bursting of the dot-com bubble in 2000), injecting liquidity to calm the markets and arguably fending off recession. Second, along with the Clinton-era Treasury secretaries Robert Rubin and Larry Summers, he successfully lobbied for deregulation of the credit industry, including the repeal of the Glass-Steagall Act, which had separated investment banks from commercial banks. At the same time he blocked attempts to subject over the counter derivatives to government regulation – to require that their risks be made clear, for example. New financial instruments, including credit-default swaps, were making markets more stable than ever before, he argued, and any attempt at regulation would subject investors to potentially calamitous levels of uncertainty. Third, Greenspan kept interest rates at record lows, stimulating economic activity while miraculously avoiding any significant rise in the consumer price index, which would normally have been expected to balloon as a result of the inflationary pressures produced by cheap money.