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Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession

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I figured that this book might be just another in the huge outpouring of post-crash reflections. I was wrong. The prose is impeccable. The research is extensive: I felt nearly a sense of guilt that the author did all the work and I had to do none. The theoretical framework is what surprised me most: he really understands debt, inflation, sound money, and power politics. So far, I would say that this book is the definitive account. It hits Greenspan in the only way that really matters: not whether his policies were as good as they might have been but the extent to which they served the cause of the State. I'm supremely impressed with this work. I should add too that I literally could NOT put this book down once I started it. My congratulations to the author who has produced a work that stands above the rest - head and shoulders above them.

A final note here: I think this might be the only book so far to fully explain the nature of the relationship between Greenspan and Rand.

Fred Sheehan is THE expert on Alan Greenspan and, in my view, this is THE book to know about him and his years at the Fed. Sheehan has written extensively about Greenspan and his policies for many years, being first skeptical and then critical when everyone else believed in the Maestro myth, which of course Greenspan himself and the media helped create through the long bull market. Thoroughly researched, the book is mostly factual, based on FOMC transcripts, memories from other Fed officials, conversations with colleagues, and other sources, each of them duly mentioned by the author. Among many eye opening issues, like his mediocre real forecasting track record, the transcript of the Senate confirmation hearing of the soon-to-be Fed Chairman back in 1987 will surely impress you. This is a serious book which shows the man behind the myth, and the politician - not the expert - Greenspan really was. Not only did he help create the bubble: he probably was a bubble himself. Finally, the book is a deep reflection on the flaws of the Federal Reserve as an institution. In the end, we must always focus on systems, not individuals. What has happened is not about a fallible man; it is about the flawed system that allowed him to do damage.

This book is an insightful study of the profound failures of Alan Greenspan's tenure as Federal Reserve Chairman. Fred Sheehan clearly articulates how Greenspan created a system that privatizes profit and socializes risk. In doing so, he performs an extremely important task in speaking truth to power about a man who was unquestionably revered by virtually every powerful sector of the financial sector. Mr. Sheehan shows why this was the case - because Greenspan was serving the interests of Wall Street at the expense of Main Street. This book provides an indispensable explanation of the Greenspan years, and serves as a bold warning regarding the misguided policies that continue to lead this nation down the wrong path. Mr. Sheehan deserves great praise for this book, which should be read by every person who wants to understand what is happening to our system.

This is a far better book than most post-recession analyses that have been published. Sheehan hammers Greenspan for hundreds of pages in Panderer to Power, yet the book stays exciting the whole way through. It's one silly statement by the "Maestro" after another. But this is more than a negative biography of Greenspan; numerous other characters are ripped to shreds in this polemic-Barney Frank and Ben Bernanke are just two more of many victims of Sheehan's caustic wit. (On Frank's defense of Fannie Mae: "Whatever Frank's qualifications for his post, reading a balance sheet was not one of them.") In fact, other than Lawrence Lindsey, no one comes out looking competent in Panderer to Power. A must read.

This is a well written, deeply researched and thoughtfully analyzed account of Alan Greenspan's ascent to power. Author Fred Sheehan provides a critical account of the Fed Chairman's rise to prominence to support the proposition that Greenspan betrayed his principles--early and often-- to further his own personal ambitions. This book is an indictment of the man and the system that allowed him to flourish. It should be read as a complement to "Age of Turbulence", Greenspan's own interesting but overly sympathetic recollection of history.

For roughly 30 years, official Washington and the business press lauded Alan Greenspan as a supposedly infallible central banker. That's a remarkable fact, given that central bankers regulate the money supply and the direction of interest rates -- not exactly a sexy patch, even in wonkish Washington. With political power that increased over the years, Greenspan, who was a self-styled acolyte of Ayn Rand, used his position to advocate a highly doctrinaire vision of markets, that they were always right, that regulators were almost certain to be wrong to intervene. And because the United States was fortunate enough to experience a period of general prosperity from the mid-1980s until 2008 (albeit one funded by enormous increases in personal and corporate debt), it appeared that Greenspan's political and economic views were indeed sound policy.

In particular, Greenspan became a cheerleader for the stock market, for consumers to use their homes as a source of wealth for consumption (via increased leverage), and for the unregulated use of derivatives. He helped lead the fight against regulation of derivatives, he refused to exercise the Fed's regulatory power to rein in the excesses of the mortgage boom and he repeatedly claimed that the banks' internal risk assessment models would keep them safe from danger.

In the wake of the financial cataclysm of 2008, all of these claims proved to be disastrously untrue. And in late 2008, testifying before Congress, Greenspan belatedly admitted that he had placed an excessive and unjustified faith in the ability of major financial institutions to self-regulate to avoid the risks of a global financial disaster. As reported in the New York Times, Greenspan testified: "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms." Greenspan said. Referring to his free-market ideology, Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact." In the wake of 2008, it is clear that Greenspan's place in history is in the process of being reassessed, and not in his favor.

Despite Greenspan's confession, however, he has continued to travel an unrepentant path and has claimed that nobody could have seen the mortgage meltdown that ensued. That claim is nonsense by itself; a small but significant number of academics and investors saw the dangers that were beginning to arise by 2005 (and even earlier) and spoke out against the risks of a real estate crash and an overleveraged financial sector that was grossly overexposed to derivatives. But their voices were drowned out by the prevailing orthodoxy of the day, of which Greenspan was perhaps the most respected voice.

Now comes Frederick Sheehan to paint a far different picture of Greenspan than the prior conventional wisdom. In Panderer to Power, Sheehan makes a convincing case Greenspan, far from being the omniscient master of economic theory, owed his rise more to traditional Washington glad-handing than intellectual acumen, and that the actual policies he pursued led directly to the current financial crisis. Sheehan shows how Greenspan's predictions for the performance of the economy were systematically wrong (meaning worse than other economists) and how he developed theories that were essentially unsubstantiated by the data to support his political and policy decisions, such as his largely discredited theory that technology advances had vastly increased US productivity. More importantly, however, Sheehan shows how Greenspan's policies were fundamentally designed to accommodate Wall Street, first by undisciplined expansion of the money supply during the 1990s, which allowed the bull market of that decade to blossom into a bubble, and then, when the equity markets could no longer be prodded, by providing the similar flood of easy money that led directly to the mortgage boom (and bust) of the 2000s. Rather than worrying about the real estate bubble, Greenspan was again its cheerleader and, on now-discredited intellectual grounds, led the fight against reining in the out-of-control Wall Street mortgage machine.

Sheehan's work is backed by detailed investigation; he cites data, Greenspan's own speeches, notes of the Fed Open Market Committee, etc. and relevant economic data. It is clear from the outset that Sheehan has profound contempt for Greenspan's policies, and Greenspan's remaining supporters may object that this is hardly an objective work. But it is a rigorous and thorough one and Sheehan makes his points convincingly: while he is hardly the only critic of Greenspan, this book is effective because it is so thoroughly researched and consistently argued. A very worthwhile read.

Mr. Sheehan has written an insightful analysis of the Greenspan years, which throws light on the darker side of Greenspan's tenure at the Federal Reserve Bank. Like many who listened to Greenspan speak, I was often puzzled as to what he meant. Mr. Sheehan, with an impeccable understanding of economic forces, reveals why and how Mr. Greenspan left us with our present economic disaster. He consistently provided access to gobs of capital for financial interests, and completely abandoned his duties of oversight. The result: the financial sector grew from 10% to 40% of GDP, while billions of dollars flowed into financial profits, only to be sucked into the inevitable black hole that had been created. Mr. Sheehan illuminates this process brillianty and is to be complimented for his efforts. I was entranced by the book and urge anyone who wants to understand the downside of Greenspan's legacy to pick up this book. Your time will be well spent. The best book I have read to help you understand our current economic woes and why they happened.

Overall Sheehan's argument is that Greenspan made a concerted effort to obtain power through social and political manipulation and through obfuscation sought to maintain that power in his position at the Federal Reserve. Or as he puts it quoting Ayn Rand, "Do you think Alan might basically be a social climber?"

Sheehan makes the case using several examples throughout Greenspan's career that the Fed Chairman couldn't have bungled it up any more than he did during his tenure. He weaves a story that can be hard to follow for the lay reader not versed in economic jargon which limits the book's impact when trying to assess and follow Sheehan's arguments. Being a book on economic policy and the Fed it's expected to touch on aspects of this but a lot of the storyline hinges on the reader understanding economic parlance and shuffling between dates of a specific timeline that make it hard to keep track of it all. This lack of understanding can limit the reader in grasping the full argument of the book having to instead come away only with broad estimations of Greenspan's negative performance.

The facts Sheehan presents concerning Greenspan's performance amount to the same standard economic argument against central banking and the Fed that has been put forth many times over. Economic explanations against government intervention abound. But why aren't people convinced, why isn't there an overwhelming popular sentiment to get rid of the Fed and establish a real system of laissez-faire? Because people aren't moved primarily by economics but by morality. Enter Ayn Rand and the real flaw of Sheehan's argument.

Given the amount of focus that Sheehan draws to Greenspan's record the reader can only assume that the author wishes there were merely a *better* bureaucrat sitting in as Chairman instead of Greenspan. The whole time he points out Greenspan's missteps he implicitly endorses the role the Fed plays in setting the terms of the economy merely disagreeing at what time or what percent the fed fund rate should have been changed to. Not once did he say as he should have that, "any rate the Fed makes will be the wrong one because it is arbitrary based on agency edict not market forces." This is where more tie-in to Ayn Rand's ethical and political theories would have been beneficial since Sheehan alludes to her a few times throughout the book and because Greenspan did in fact have a professional connection to Rand at one time. Sheehan cites Greenspan's essay, "Gold and Economic Freedom" found in Ayn Rand's Capitalism: The Unknown Ideal but mainly as retort to Greenspan's economic policies not as any deeper moral analysis.

Given that the subject of study is Greenspan's legacy and not the Fed in general it's expected that the author focus on that and in this task Sheehan accomplishes his goal. However in not presenting the arguments against government intervention on principle it leaves the reader with the impression that the fault lies solely with Greenspan or other individual bureaucrats and not the Fed itself. This is why if Sheehan had explained how Greenspan betrayed Rand's philosophy it would have helped bolster his thesis instead of having to rely on supposition regarding how many times he was on the cover of a magazine.

For the moral argument missing in Sheehan's book look for Rand's, Capitalism: The Unknown Ideal and for Greenspan's supposed enduring relation to Ayn Rand and Objectivism I refer you to "Alan Greenspan vs. Ayn Rand and Freedom" [...]

Originally published at the LibertarianChristians Blog:

For the bulk of my life so far, I have lived in the age of Alan Greenspan, the chairman of the Federal Reserve Bank from 1987 to 2006. Mentioning a Federal Reserve chair like this in the past would not have been considered normal, yet Mr. Greenspan has a sort of legendary status associated with him. Well, at least some people consider him to be an iconic figure, but more and more the general public is coming to realize the destructive effect he has had on the world economy. Books like Frederick Sheehan's "Panderer to Power" have something to do with the dispelling of the myth.

Sheehan's book is the first critical, post-crash biography of Greenspan. Using Greenspan's own words, Sheehan tracks Greenspan's education as a young man, early professional life, his meteoric rise to stardom as a celebrity figure, and his tenure as Federal Reserve chair. The questions primarily raised are: What kind of man is this who has so much power over the world, and what did he do that has led us to today's economic crisis? The answers are quite surprising. Here are some of the things I learned about Greenspan.

* Greenspan was supposedly a disciple of Ayn Rand, yet he probably did not understand what Rand generally was talking about. Nathaniel Branden wrote later, "I wondered to what extent he was aware of Rand's opinions." Apparently, he would even argue the question of his own existence with the objectivist coterie. Rand herself wondered, "Do you think Alan might basically be a social climber?"
* Even in his pre-Fed years, Greenspan was actually a rather mediocre economist and forecaster. Time after time he would make highly-publicized predictions and yet the exact opposite would occur (see pages 43, 54, and chapter 7).
* Greenspan was a master self-marketer, which is probably the reason for his rise to stardom. He constantly engaged the media and the New York financier social scene, hence he had everyone's ear without the wisdom to back it up. How else can you be both a professional economist and yet date Barbara Walters?
* Even though Greenspan has supposedly had a historically apolitical career, he was a master politician (read: liar). One only need look to his involvement during the Nixon and Carter presidencies to realize that he knew how to play the political game brilliantly.
* Greenspan's policies during his Fed years were incredibly political as well. He frequently timed his actions in accordance with what was politically expedient. Wall Street and the fat cat Congress could count on the legendary "Greenspan Put" to be their savior when things were looking down.
* Post-crash, Greenspan has tried to play his own game of historical revisionism about his policies that led to the economic crisis. Sheehan exposes these and many other lies.
* Greenspan has been hired as a consultant by many of the firms who profited from the economic crisis via government handouts. Go figure, the man who enriches Wall Street and causes the meltdown gets the extra paycheck...

Clearly, there is much yet to learn about the man whom many called "the second-most powerful man in the world" for nearly twenty years.

In summary, Sheehan's retrospective on Greenspan is a fascinating read, and I anticipate it will become a valued resource for those looking to understand the Greenspan years from a perspective that offers more than tacit approval of inflationism and government intervention in the economy. Keep in mind, though, it is not an easy read. Economics is discussed at a fairly high, but understandable level. You will probably end up like me, referring to Wikipedia and other sources to recall certain investment and econ topics. Nevertheless, Panderer to Power is worth your time if you desire more knowledge about the Greenspan legacy.

It is a timely written horror story that you won't be able to put down if you are into money. A loud wakeup call to the citizens as the USA has been descending on a path of corruption decade after decade with each succeeding decade getting deeper into foul play following the historical footsteps of ancient Rome, this book, on a personal level will make you understand the trends affecting the financial markets. Thus anybody who wants to make money in the markets should read this book because unless you know the system insightfully you will not be able to make money through the system. The author, Fred Sheehan, does not give us his opinion but give us facts using the synopses of speeches made by those in power during the decade of greed. However be prepared to be overwhelmed as the book, within its limited pages, attempts to cover a whole lot of material that took the financial markets in an unprecedented roller coaster.

It is the story of Alan Greenspan who rose from a non-illustrious career with no track record to write home about to be probably the most powerful man in the world as the Chairman of the Federal Reserve Board and held that position longer than any other. As you read you will realize that if there is a prize for the best politician ever lived, Greenspan to be a formidable candidate for that position for it was his skill at politics gotten him there. You cannot blame Greenspan. After all he was the product of the environment that facilitated his meteoric rise. There is an instance where the author describes a party that Greenspan attended (where people were being awestruck by the mere appearance of Greenspan the economist rock star) where he mentions also the attendance of Jerzy Kosinski the author of "Being There." "Being There" tells the story of a simpleton come to be admired as a genius by the President of the USA and others around him because they begin to interpret everything he says as words of a sage.

Sheehan points out that Greenspan was elevated into cult status by the system in spite of the fact that enough sophisticated people were alarmed as to the direction the country was heading warning how he could push the whole global economy into a tailspin. It is impossible to figure out why it went to such an extent in a country with more Nobel-prize-winners than any other nation. The conclusion I could reach is that people in power knew the scam being carried on by Greenspan as the Fed Chair but kept quiet because by knowing what was going on they could make unimaginable amount of wealth. No other point in history has insiders have made so much wealth as stocks went over thousands of percent. So all insiders had to do was to own shares of companies and keep quiet watching the money being created by the Federal Reserve snowballing values into stratospheric levels.

Greenspan is an enigma because he seems like a man who would understand that an economy cannot be sustained forever if the system has to depend on creating more and more money and the money being created end up only in the hands of a few. Then the question is why did he continue to carry on with such disastrous policies. The author attributes it to pandering to power. But reading the book I got the impression that Greenspan estimated as long as the Federal Reserve has the power to create unlimited amount of money he could carry on that scheme till he retires and when the crumbling down finally comes, people to place the blame on his successor. His involvement with president Reagan who turned this country from the greatest creditor to the biggest debtor nation paving the way for runaway deficits and still being loved deeply may have given him the impetus for that. However, he may have misjudged the courage of people such as Fred Sheehan to bear it all. In the current atmosphere, the only place people will be able to read such an inside account is in books such as this. Do not expect the corporate-owned media to give you such factual accounts.

The author shows how the current Chairman of the Federal Reserve, Ben Bernanke stood behind Greenspan loyally fanning the fire of speculation. Let's hope the President and the Senate that planning on confirming the current Chair to another term will read Sheehan's book. It is impossible to believe that recession induced by the actions of the reckless Fed is over, especially when the medicine they use to cure is the same old medicine that took us there. So the epilogue for these actions may be written yet in the future. Stay tuned.