The former Fed chairman Alan Greenspan was for many years revered for his management of US monetary policy, which covered the period from the stockmarket crash of 1987 to just before the banking crisis of 2008. During the intervening years he also steered through the Savings and Loan debacle, the bond market crash of 1993-4, the late 1990s Asian crisis and the collapse of LTCM, crisis and default in Mexico and Argentina, the Enron and World Com collapses – and no doubt other events I've forgotten.

It's only since his departure that his reputation has come into question, although a number of economists had earlier started to question the 'Greenspan put' whereby monetary policy seemed to offer financial markets a promise that if the markets started to fall, a monetary stimulus would come to the rescue. And Robert Shiller had even more pointedly in his bestsellingbook Irrational Exuberance challenged the Fed's intellectual model of the financial markets, arguing that policy needed to take account of the realities of psychology and tackle the asset price bubble.

Greenspan's memoir The Age of Turbulence published in 2007 gave us his account of the story so far. Recently the Brookings Institute has issued a paper he has written about the recent crisis. It's very interesting indeed, setting events of the 1990s and 2000s in the context of the end of the Cold War and the great sweep of history. He sets his choices in the context of the battle of ideas between markets and communist planning, and the victory of the former. It is rare to see a prominent public figure set out so clearly, I think, the philosophical basis of everyday practical decisions. Greenspan is of course well known for being a follower of the writer Ayn Rand. Greenspan recommends higher capital and collateral requirements as the best regulatory response to the 2007-08 crisis. But he concludes:

“Unless there is a societal choice to abandon dynamic markets and leverage for
some form of central planning, I fear that preventing bubbles will in the end turn out to be
infeasible. Assuaging their aftermath seems the best we can hope for. Policies, both
private and public, should focus on ameliorating the extent of deprivation and hardship
caused by deflationary crises. But if an effective way to defuse leveraged bubbles
without a major impact on economic growth is discovered, it would be a major step
forward in organizing our market economies.”

There is also an interesting blog on the Greenspan article by David Indiviglio of The Atlantic.