Former BoE Governor King Talks Alan Greenspan's Legacy, UK Economy

**SPEAKER_1** (0:02)
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**Caroline Hepker** (0:07)
Lizzy, we learnt of course that Alan Greenspan, the chairman of the Federal Reserve for 18 years, has died at the age of 100 One of the great central bankers of our time, he steered the US through stock market crashes in 1987 and 2001 after the September 11th attack.
But he faced criticism over easy monetary policy and the so-called Greenspan put. Now, we wanted to think about Greenspan's legacy.
Of course, contested. Joining us now is Mervyn King, who is the former Bank of England governor to discuss. Lord King, thank you so much for being with us. I mean, how to sum up such a life, the impact of this man on the United States and abroad. But I wanted your thoughts, a contemporary in part. How do you think of Alan Greenspan?

**Mervyn King** (0:59)
Well, he was a great man. And I like to think that this is an end of an era, because I think in American public life, there have been three great centurions, Alan Greenspan, George Shultz, and Henry Kissinger. And all three reached and died at the age of 100 I was privileged to know them all. Alan, of course, I was closest to, because we were opposite numbers for several years.
I was a deputy at the Bank of England when he was chairing the Fed. And I kept in touch with him and saw him quite often after he left the Federal Reserve. And when I was appointed governor of the bank, I went to Washington to see Alan and ask for advice. And he gave me the best advice I think that anyone gave me, which was keep the mornings free to think, read and write. And that was enormously helpful and important in working out how to play the role of a central bank governor.

**Lizzy Burden** (2:00)
Lord King, thank you for joining us this morning. What other lessons should central bankers today take from Greenspan?

**Mervyn King** (2:09)
Well, because he had an unrivaled ability to think for himself and delve into the details of data on the economy.
He didn't just rely on someone putting a piece of paper in front of him, saying this is the latest official statistic on the labor market or production. He would talk to business people directly and he would find out for himself what was going on. And I think the high peak of that performance was in the 1990s when he was really the first to spot the impact of faster productivity growth in the US economy.

**Caroline Hepker** (2:47)
Greenspan in office, as you say, was widely respected. I mean, I remember markets hung on every word that he uttered, although cryptic as it often was, as our own editor in chief, John McAulthwaite, has said. The Greenspan Fed managed to avoid even one single quarter of falling year on year GDP during his tenure, even in the.com bust. You know, there was an incredible achievement and run over that 18 year period. And yet Greenspan did fall out of favor in some senses, particularly after he left office. His policies were seen perhaps as having resulted in moral hazard in economic bubbles later. He sort of departed just before the housing bubble burst. Now, there also almost seems to be a reversal of that because he was out of office for so long and maybe a rethink about that.
But in terms of that moment where, and those years where he was out of favor, how credible do you think that is? How do you think about that moment, that timeframe when his policies were criticized?

**Mervyn King** (4:01)
Well, I think that will be an unfair thing to do for him. He presided, as you said, over a long period of sustained expansion and low inflation for almost 20 years. That's a remarkable feat to be able to manage. Circumstances were not difficult for part of that time, though within two months of taking office, he had to deal with the 1987 stock market crash where prices fell by around 30 percent, biggest crash since 1929
And he dealt with that deftly and swiftly and received praise for that. So he did have to handle some quite tricky problems. I think later on, I mean, my experience has been that politicians and others will always want to find someone to blame. And once Alan had left office, he was an easy target for someone to blame. But the problems that arose in the banking sector were largely the decisions taken by banks themselves. And I think Alan admitted afterwards that he had assumed that banks would focus on managing the risks they were taking in their own self-interest. And of course they didn't. They took wild risks, which resulted in the need for them to be rescued by the Fed and by the US Treasury. Now that didn't do the banks any good. I mean, it was a near death experience for many of them. And if they came through it, the people leading the banks did not come through it. They left. So, you know, but Alan recognized that. Nevertheless, the idea that somehow the state should manage and run everything is not an idea that's either carried on, it really doesn't make much sense. Alan had deep convictions that sound money and a market economy were the way to a prosperous democratic society.