Bubble Man: Alan Greenspan and the Missing 7 Trillion Dollars
Peter Hartcher, W W Norton, 2006, xix + 231 pages, £15.99.

Although more than half a year into Ben Bernanke’s tenure as Chairman of the Federal Reserve, and the US economy slowing as another asset bubble unwinds, the name, ‘Alan Greenspan’ still evokes a sense of awe in many circles. It was, therefore, a slight surprise that any book attempting to sully the name of the former Fed chairman had been written in his lifetime, given the tendency of previous authors on this subject (eg Maestro by Bob Woodward), to heap undiluted praise on Mr Greenspan.

Peter Hartcher’s book is no Maestro. But having said this, it is not an ‘anti-Maestro’ either. In developing the central element of his thesis, namely that Greenspan’s lack of countervailing action during the 1990s led to the development of a stock market bubble and its subsequent bust, Hartcher is actually fairly even-handed, praising on some occasions (Greenspan’s political savvy and personal skills for example), though unflinchingly critical when necessary too.

Hartcher is also fair in pointing out that the dotcom debacle had multiple causes: 1) the CEOs of dotcom companies, for believing their companies could ever make money; 2) Wall Street for encouraging the flotation and underwriting of companies they knew to be worthless; 3) the media for pouring fuel on the flames of the dotcom mania; 4) the business cycle, or rather, people’s inability to spot the downturn in corporate profits before it was too late; 5) excessively-expansionary interest rates (for which of course he does blame Greenspan); and 6) the government for unfettered deregulation of the corporate sector, encouraging much of the ensuing malfeasance that poisoned investor attitudes towards equities.

Hartcher’s book is eminently readable, containing a great number of very interesting, and often very amusing anecdotes. And at a more practical level, his book is also packed with exhaustive cross-references to relevant research studies of bubbles and central bank policy that practitioners in this area will undoubtedly find useful.

Perhaps the only criticism is that the proof of Greenspan’s guilt in the stock market boom and eventual bust is not wholly convincing. Much of the burden of proof rests on contradictions of private and public comments by Greenspan early on in the stock market run-up and of course his implicit suggestion that there was a “Greenspan put” giving investors a sense of invulnerability as they threw their money ($7 trillion of it) away.

Rob Carnell
ING Financial Markets