Greenspan Speaks: Will Investors Listen?
Experts divided on whether Greenspan can affect the markets just by speaking.
Sept. 17, 2007 — -- Ahead of Tuesday's meeting to set interest rates, it was a former chairman of the Federal Reserve who stole headlines Monday and got the markets buzzing.
In a series of recent interviews to promote his new memoir "The Age of Turbulence," Alan Greenspan has assailed the Bush administration's fiscal policy and rationale for invading Iraq, admitted he failed to realize the significance of subprime real estate lending and defended his position on lowering interest rates.
For 18 years as chairman of the Fed, financial markets hung on his every word, and in both major policy pronouncements and brief utterances, Greenspan could literally move markets. But as a private citizen -- it's now more than year since he left the Fed -- Greenspan is still ruffling feathers with his comments.
Greenspan started a financial forecasting firm, Greenspan Associates, that he hopes will parlay his reputation as an oracle of the markets into a thriving business.
In February, Greenspan irked investors and his successor, Ben Bernanke, when he predicted a one in three chance of a recession by the end of the year.
In a recent interview with CBS's "60 Minutes," Greenspan reproached those, including Bernanke, who would criticize him for using his reputation as a public figure to comment as a private citizen.
"I then become incarcerated and am not allowed to do anything because I might say something," Greenspan said in the interview. "My responsibility is what I'm doing now. I'm not commenting on monetary policy, I'm commenting on global things…How am I going to pursue my profession without doing precisely that [commenting on the possibility of a recession]?"
Investors are divided on just how much Greenspan, or any private citizen, can do to upset the markets just by talking.
"A single individual, who is just a private citizen, cannot move markets by words alone. What moves markets is a governmental change in policy or a commitment to change financial assets by a large investor," said Mike Ryan, head of wealth management research at UBS. "His influence is limited in that he no longer has a finger on policy -- he's not pulling levers -- and he is not committing billions of dollars as an investor."
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