- Foreign policy analyses written by CFR fellows and published by the trade presses, academic presses, or the Council on Foreign Relations Press.
Winner of the George S. Eccles Prize in Economic Writing
Former Chairman of the Federal Reserve Alan Greenspan was once hailed as the omnipotent “maestro” of the U.S. economy, but his reputation suffered in the aftermath of the 2008 financial crisis. In The Man Who Knew: The Life and Times of Alan Greenspan, a new biography based on five years of research and unmatched access to Greenspan, Sebastian Mallaby presents a nuanced assessment of one of the most influential economic statesmen of the twentieth century and issues a warning about the future of finance. The story of Greenspan, according to Mallaby, is the story of the making of modern finance, for good and for ill.
Mallaby, the Council on Foreign Relations Paul A. Volcker Senior Fellow for International Economics, is a Washington Post contributing columnist and two-time Pulitzer Prize finalist, as well as the author of several books, including the best-selling More Money Than God. The Man Who Knew won the 2016 Financial Times and McKinsey Business Book of the Year Award. A review by Martin Wolf in the Economist has called the book “superb,” saying that it “throws a sharp light on American policy and policymaking over four decades.”
Born with a talent for crunching statistics and a reverence for the self-made railroad tycoons of the Gilded Age, Greenspan rose from humble origins in the Jewish enclave of Washington Heights, New York, to an influential career in Washington, DC. When Greenspan first entered public service—as an advisor and part-time polling analyst for Nixon—interest rates were regulated, financial derivatives barely existed, and the value of the dollar was pegged to gold. By the time he retired, this relatively regulated system had been replaced by something judged by many to be a freewheeling free-for-all.
As finance changed out of all recognition, Greenspan changed as well. As a young man he came under the influence of the libertarian writer Ayn Rand, and declared that the creation of the Federal Reserve System had been “one of the historic disasters in American history.” But as he worked for Nixon and successive Republican presidents, Greenspan shed his ideology, gradually becoming a more pragmatic figure and even blocking radical supply-side economic policies during the Reagan administration.
“Because Greenspan dominated monetary policy so completely for almost two decades, his impact on history is best viewed through a monetary lens,” writes Mallaby. “On the one hand, he brilliantly limited fluctuations in inflation. . . . On the other hand, Greenspan utterly failed to limit leverage and bubbles, and this failure magnified financial fragility. Because he conducted monetary policy with a view to ensuring price stability, not financial stability, Greenspan allowed this fragility to grow and grow,” Mallaby argues.
Most histories of the 2008 crisis have ascribed blame to Greenspan’s excessive faith in the self-policing efficiency of markets. Drawing on original reporting and documents from Freedom of Information Act requests, Mallaby shows why this is wrong: Greenspan knew that financial instability mattered and even attempted to impose regulatory restraints on unsafe mortgage lending in the lead-up to the housing bubble. But Greenspan ultimately focused on inflation, reflecting the reality that “controlling asset prices and leverage was hard; fighting inflation was easier.” This decision to downplay financial stability was “Greenspan’s most consequential error,” Mallaby asserts. He warns that, “by committing itself more formally to inflation targeting after Greenspan’s retirement, the Fed has unfortunately compounded this problem.”
Because Greenspan understood financial fragility better than most, Mallaby calls him “the man who knew.” The question, according to Mallaby, is why Greenspan did not act, and whether anyone else could or would have.
A Council on Foreign Relations Book
Reviews and Endorsements
A tour de force, the story not just of Alan Greenspan's career but equally of America's economic triumphs and failures over five decades. This carefully researched and elegantly written book will be essential reading for those who aspire to make policy and for anyone who wants to divine what drives the choices that our leaders make.
In a superb new book, the product of more than five years' research, Sebastian Mallaby helps history make up its mind about Alan Greenspan.
Mr. Greenspan is a fascinating subject because for so long he was considered a genius, only to later be blamed for the financial crisis. Mr. Mallaby does an exquisite job going beyond these two versions of the Greenspan narrative and taking the reader inside the complicated mind of a man who may have had one of the largest ever influences over our economy.
Andrew Ross Sorkin, New York Times
Mallaby's hefty book is a tour de force. . . . Much like the man he profiles, Mallaby shows a solid understanding of competing economic—and political—theories, without tying himself inextricably to any one.
Highly recommended. . . . This book is not just for Fed-watchers—anyone with an interest in postwar U.S. economic and political history will enjoy The Man Who Knew.
Ben Bernanke, Brookings
While Greenspan offered considerable assistance to Mallaby and his team of researchers, I detect no sense of capture in the balanced and well-judged conclusions. As a description of the politics and pressures under which modern independent central banking has to operate, the book is incomparable.
Excellent . . . [The] view of Greenspan as a political animal is central to Mallaby's account. It is also, along with the often amusing depictions of Greenspan's personal life, what makes it so much fun to read. In his autobiography, published in 2007, Greenspan depicted his rise to power as a series of lucky coincidences. Mallaby describes in detail how Greenspan climbed to the top, and it's a much more interesting story.
In Greenspan's life story, then, we find a perfectly timed morality play about putting too much faith in oracles—and what happens when even they admit that things have gone wrong.
Rana Foroohar, Time
Anyone who claims to know anything about central banking—or for that matter, modern American political and financial history—needs to read Sebastian Mallaby's brilliantly researched and elegantly written The Man Who Knew, a work of first-class scholarship, delightfully full of surprises.
Niall Ferguson, Bloomberg's Best Books of 2016
The Man Who Knew is much more than an enjoyable and well-researched biography of Alan Greenspan, chairman of the U.S. Federal Reserve for 18 years and a regular fixture by the side of every U.S. president from Richard Nixon until George W. Bush. In addition to describing the life of an accomplished human being full of both brilliance and paradoxes, it provides compelling insights into the politics of complex decision-making, especially under uncertainty, as well as the role of personalities and the difficulties of overcoming spreading contradictions. It documents the evolution of finance and central banking via the perspective of one of the most influential policymakers of modern times.
Mohamed El-Erian, Bloomberg's Best Books of 2016
An extremely well-written and engaging book that simultaneously tells the history of former Chairman Greenspan and the evolution of modern finance.
Diana Farrell, Bloomberg's Best Books of 2016
A fascinating tale, well written. . . . Reveals an extraordinary man in all his complexity.
An impressive achievement and an important piece of scholarship that both deserves and rewards the careful reader.
Thorough and heardheaded. . . . If Mallaby, an eminent financial journalist, had written his book in 2006, it would have had to be a hagiography; in 2016, it is something between a prosecutor’s brief and an inquest.
Admire him or despise him, Alan Greenspan was the preeminent financial statesman of the postwar era. But Sebastian Mallaby's magisterial biography casts him as something more (and more intriguing) than that: a masterly and mesmerizing politician. Whether counseling Richard Nixon on the race-freighted Southern strategy, scheming with Watergate felon Charles Colson on a plan to neuter the Federal Reserve's independence, or waging bureaucratic war against Henry Kissinger (and winning!), Greenspan was cunning, stealthy, and ruthless, neck deep in the political intrigues of his era—less the bloodless monetary technocrat of lore than the J. Edgar Hoover of economics. In riveting, page-turning fashion, The Man Who Knew reveals the man in full.
John Heilemann, managing editor of Bloomberg Politics, host of With All Due Respect, and author of Game Change and Double Down
Mallaby has a rare ability to blend the stories of powerful people with insights into influential institutions and formidable policy challenges. The Man Who Knew is a superb biography, as well as an economic history, political profile, and monetary policy primer. Careful research, fine writing, an intriguing narrative, and a cautionary tale: this book has it all.
Robert B. Zoellick, Former President of the World Bank, U.S. Trade Representative, and U.S. Deputy Secretary of State
A masterful biography of Alan Greenspan, full of astute insights and deft judgments about the career of one of the most consequential, and yet enigmatic, economic statesman of our era, a book that provides a unique and fascinating window into the major economic policy debates of the last fifty years.
Liaquat Ahamed, Pulitzer Prize–winning author of Lords of Finance: The Bankers Who Broke the World
A fascinating and balanced study of arguably the most important figure of the post-war global financial scene.
Mervyn King, Governor of the Bank of England, 2003–2013
The astonishing story of how a solitary young man, who found solace in numbers, became the world's most powerful economic decision-maker, presiding over the revolution in finance that touches everyone. With judgment and authority, The Man Who Knew takes us inside the great economic crises of our times—and provides insight for the crises and turmoil yet to come.
Daniel Yergin, author of The Prize: the Epic Quest for Oil, Money, and Power and of The Quest: Energy, Security, and the Remaking of the Modern World
A splendid biography—compelling, readable, provocative, richly researched, brimming with authorial intelligence. A rich, subtle portrait of a complex and surprisingly vulnerable human being. The Man Who Knew is a courageous book, for it reckons with Greenspan's shortcomings with unbridled honesty. Its judgments are all the more devastating because Mallaby is scrupulously fair, as unafraid to praise as he is to critique. And as he leads us through the passages of Greenspan's life, Mallaby takes us on a tour of the sizzling financial dramas and of the great intellectual debates of the postwar years, from the inflation agonies of Gerald Ford to the mortgage bubble of the early 2000s. The Man Who Knew will surely become the definitive Greenspan biography.
Roger Lowenstein, author of America's Bank: The Epic Struggle to Create the Federal Reserve and When Genius Failed