As Greenspan’s reputation sinks, Volcker’s rises

Debate continues over who was more effective at managing the economy

	Observers have always said Alan Greenspan's, left, and Paul Volcker, right, have had differing styles and methods. Greenspan was more the politician while Volcker shunned the spotlight.
Chip Somodevilla / Getty Images file

Market update

Quotes delayed 15+ min.

updated 3:28 p.m. ET April 13, 2008

The more Alan Greenspan whines about his tarnished legacy since leaving the helm of the Federal Reserve, the more his predecessor Paul Volcker looks to claim the title as the “greatest central banker who ever lived.”

That’s what Greenspan was hailed as in 2005, when the economy was booming and inflation remained low. Economists lauded his significant contributions during his 18-year Fed tenure, which included making the central bank more communicative and weathering two recessions.

Those accolades largely overshadowed Volcker’s achievements. He left the Fed in 1987 after an 8-year run of steering the economy through a tough battle against double-digit gains in inflation and a punishing economic decline.

Story continues below ↓

advertisement | your ad here

Volcker’s legacy seems to be soaring now, while Greenspan’s is sinking — despite his intense effort to shift blame away from himself as the cause of today’s punishing financial crisis.

In an interesting juxtaposition of events in recent days, the two former Fed chairmen collided in the headlines. Greenspan, who left Fed two years ago, took to print and television media to defend his battered reputation. Volcker, in two rare, back-to-back speeches, gave a critical assessment of the current economy and the Fed’s role in creating and managing the crisis.

Their styles have always contrasted, now and when they were at the Fed. Economists say Greenspan is as much a politician as he is a policymaker — always looking for opportunities to claim the spotlight — a tactic that maybe hindering, rather helping his reputation now. It’s just the opposite for Volcker.

Once upon a time, Greenspan’s monetary policies and lax approach to regulation won him praise, not criticism. An academic paper written in 2005 said he had a legitimate claim to being the “greatest” central banker ever and touted his “magic formula” — where discretion rather than rules went into the Fed’s decision making.

But now, in the midst of today’s financial market turmoil and economic downturn, Greenspan — who was knighted by Britain for his achievements — is finding his legacy being called into question.