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Jan31
20 Years Past...
I can’t remember everything in the past 20 years but certain things stand out. Some of the most memorable events of my career track the challenges faced by Fed Chairman Alan Greenspan.

One was the stock market crash of October 19, 1987. I had received a degree in finance a year before and was working for a finance company. I was a year from entering the Graduate School of Business at the University of Chicago and a hoping for a career on Wall Street.

1987 was the year President Ronald Reagan appointed Alan Greenspan as the new Chairman of the Federal Reserve. In my mind, as a student of economics and finance, it seemed impossible to replace the towering Paul Volcker who in the early 80s had reigned in the worst unemployment and inflation since the Depression.

Greenspan was tested immediately as he faced the largest stock market crash since the crash of 1929. The Dow dropped 508 points and 22% -- only 69 days into Greenspan's tenure. On day after Black Monday, Greenspan signaled the Fed's commitment to keep financial institutions afloat pledging "to serve as a source of liquidity to support the economic and financial system." Following the crash, the Fed injected roughly $6 billion dollars a day into the economy.

Journalist and author Peter Hartcher wrote,

“The challenge that came within a couple of months was the black Monday Stock Exchange crash of '87. When he handled that flawlessly he became enshrined instantly as a Wall Street hero and national hero.”

Fast forward to the first week August 1990, memorable to me as my first week at Kidder, Peabody. Iraq invaded Kuwait, sending global oil prices sharply higher and sparking a recession and severely affecting the financial markets (no deals for the investment banker in training – just training exercises until midnight).

In 2001 another stock market crash occurred followed six months later by the September 11 attacks of the World Trade Center. I had long left Wall Street but many friends were still there.  Like many, I will never forget this day. My brother had dinner the night before the attacks at Windows on The World, the former restaurant at the top of the World Trade Center and had flown out of JFK that morning. Fortunately, he was safe.

Greenspan responded to these crises.  Over a series of months, Greenspan lowered the key federal funds rate to a 40-year low 1.75% during 2001 and is credited with pulling the economy quickly out of recession.

A test of any leader is his ability to operate under pressure and in situations characterized by uncertainty and unknown outcomes. Greenspan, like most people in the public, has critics and supporters. He was appointed and served under democrat and republican administrations alike, yet he adapted to the changing political and economic scenery. His ability to adapt and make small changes that had positive long-term effects may be his greatest legacy.

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