No contrition from the Fed’s Mr Magoo

The Map and the Territory coverThe Map and the Territory

By Alan Greenspan
Published by Allen Lane
(Buy at Amazon)

Over the last five years, Alan Greenspan’s reputation has collapsed. As head of the US Federal Reserve from 1987 to 2006, his easy-money policies were praised for boosting growth in the 1990s.

In 2000, presidential candidate John McCain even said that if Greenspan died, he would “prop him up and put sunglasses on him”, so enamoured were investors of the Fed boss.

But those same policies are now widely blamed for the housing bubble and subsequent crash, and Greenspan has lost the ‘maestro’ nickname acquired in the boom years.

However, says Steven Pearlstein in The Washington Post, those “looking for [Greenspan] to accept any responsibility for the crisis” in his new book – The Map and the Territory: Risk, Human Nature, and the Future of Forecasting – will be “sorely disappointed”. Instead of learning from his mistakes, “Greenspan seems determined to repeat them”.

This book is meant to be “an account of his intellectual journey”, but it ends up right back where he began, with his “antipathy toward market regulation” intact. Worse still, the book is poorly written, stuffed with “rambling and disjointed observations”, “straw men” and “non sequiturs”.

Greenspan should certainly have “been more specific in his recommendations”, says former US Treasury Secretary Larry Summers in the Financial Times. Despite an apparent embrace of behavioural economics, he “sidesteps” the issue of whether the Fed should have been more involved in consumer protection. But the book is still “a very important statement, whether one ultimately agrees or disagrees with the author”.

Greenspan has “a rare talent for framing economic trends”, says Binyamin Applebaum in The New York Times. And his suggestion that America’s woes are down to over-taxing the wealthy is “provocative”.

However, he could have enlivened the book with more detail on his time as Fed boss. And while he blames the crisis on banks holding too little capital, he skips his role“in creating rules that let banks set their own capital levels”.

The book says “next to nothing about the author’s historic failure to reduce the risks leading to the crisis”, says Bloomberg’s Daniel Akst. And it only “pretends to tackle the subject of forecasting”. Greenspan instead displays huge “chutzpa”.

He attacks the bank bail-outs, even though as Fed chief he rushed “to float sinking markets with lower interest rates whenever they faltered”. And he still thinks “the real problem is too much government”. His “clueless” book is like an “art history by Mr Magoo”.

• The Map and the Territory: Risk, Human Nature, and the Future of Forecasting, by Alan Greenspan is published by Allen Lane (£25).