One for the money: how Alan Greenspan's disastrous reign at the Fed came to be.

• Author: Cooper, Ryan
• Position: The Man Who Knew: The Life and Times of Alan Greenspan - Book review

The Man Who Knew: The Life and Times of Alan Greenspan

by Sebastian Mallaby

Penguin Press, 800 pp.

In December 2015, America's central bank, the Federal Reserve, raised its target interest rate by one-quarter of 1 percent. This was the first such action in exactly seven years, when the Fed cut rates all the way to zero in the depths of the Great Recession. It was a move that came despite the fact that the Fed's preferred measure of inflation was six-tenths of a point below its 2 percent target, which it had not met since the spring of 2012 and was trending down, suggesting that there was room for employment to grow before inflation threatened.

The Fed committee looked past all that, projecting that there would be four similar rate increases during 2016, as the economy gained more strength. That projection turned out to be highly premature. Employment and inflation surveys repeatedly came in weak enough that the Fed was forced to delay rate hikes. At the time of writing, there has not been one yet in 2016.

For Fed watchers, this is an entirely unsurprising state of affairs. For every one of those seven years, as America suffered its worst bout of mass unemployment since the 1930s, the Fed has been consumed with worry over future inflation, and very obviously itching for some excuse to halt unconventional stimulus and raise interest rates above zero. Replacing Republican Ben Bernanke as Fed chair with Democrat Janet Yellen did precisely nothing to address this tendency.

Why? One place to look is The Man Who Knew: The Life and Times of Alan Greenspan, a new biography by the former Economist reporter and author Sebastian Mallaby. Greenspan, who was Fed chair from 1987 to 2006, was more responsible than any other single person for transforming that institution and its broader political culture into the form we know today: one obsessed with inflation, unconcerned with economic inequality, ranking price stability far above full employment, and always ready to backstop a bloated and disaster-prone financial sector.

Mallaby's book is compelling reading. Against my better judgment, I found myself rather sympathizing with Greenspan, while still noting his immensely negative influence-but not for the reasons Mallaby gives. When it comes to assessing Greenspan's legacy, Mallaby gets both his worst flaws and his best qualities wrong.

But first, the good stuff. Mallaby deftly leads the reader through Greenspan's life, from Ayn Rand cultist to consultant to D.C. power player to world's greatest economic policymaker. The skill with which the portrait is painted, and the tremendous amount of research that clearly went into the work, are the best parts of the book.

Greenspan was an ambitious but shy data-obsessed nerd who stumbled into extreme political skill. For a relative newcomer to the Greenspan legendarium, this was the most surprising and interesting part of the book. It turns out that a deep facility with statistics, a reticent demeanor, and a nose for power...