First nominated to the Federal Reserve by President Ronald Reagan in August 1987, Greenspan was reappointed at successive four-year intervals until retiring on January 31, 2006, after the second-longest tenure in the position, behind only William McChesney Martin.

Although he was subdued in his public appearances, favorable media coverage raised his profile to a point that several observers likened him to a "rock star".

[21] At Columbia University, he pursued advanced economic studies under Arthur Burns but withdrew because of his increasing work demand at Townsend-Greenspan & Company.

[citation needed] On June 2, 1987, President Ronald Reagan nominated Greenspan as a successor to Paul Volcker, as chairman of the Board of Governors of the Federal Reserve, and the Senate confirmed him on August 11, 1987.

[34] Two months after his confirmation, Greenspan said immediately following the 1987 stock market crash that the Fed "affirmed today its readiness to serve as a source of liquidity to support the economic and financial system".

[35][36][37] Although the Federal Reserve followed its announcement with monetary policy actions, which became known as the Greenspan put, George H. W. Bush attributed his re-election loss to a sluggish response.

Greenspan advised senior members of the George W. Bush administration to depose Saddam Hussein for the sake of the oil markets.

"[50] Greenspan opposed tariffs against the People's Republic of China for its refusal to let the yuan rise,[51] suggesting instead that any American workers displaced by Chinese trade could be compensated through unemployment insurance and retraining programs.

Greenspan's criticisms of President Bush include his refusal to veto spending bills, sending the country into increasingly deep deficits, and for "putting political imperatives ahead of sound economic policies".

He asserts this would narrow the inequality between the minority of high-income earners and most workers whose wages have not grown in proportion with globalization and the nation's GDP growth.

[69] Greenspan has come under criticism from Harry Binswanger,[75] who believes his actions while at work for the Federal Reserve and his publicly expressed opinions on other issues show abandonment of Objectivist and free market principles.

[77] When asked about free markets and Rand's ideas, however, Greenspan clarified his stance on laissez faire capitalism and asserted that in a democratic society there could be no better alternative.

[79] In the wake of the subprime mortgage and credit crisis in 2007, Greenspan stated that there was a bubble in the U.S. housing market, warning in 2007 of "large double digit declines" in home values "larger than most people expect".

[86] The Federal Reserve acknowledged the connection between lower interest rates, higher home values, and the increased liquidity the higher home values bring to the overall economy: "Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission.

Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country ... With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. ...

[92]The subprime mortgage industry collapsed in March 2007, with many of the largest lenders filing for bankruptcy protection in the face of spiraling foreclosure rates.

"[95] In September 2008, Joseph Stiglitz stated that Greenspan "didn't really believe in regulation; when the excesses of the financial system were noted, (he and others) called for self-regulation—an oxymoron".

"[98] Despite this, Greenspan still claims to be a firm believer in free markets, although in his 2007 biography he wrote, "History has not dealt kindly with the aftermath of protracted periods of low risk premiums" as seen before the credit crisis of 2008.

Notable critics included J. Bradford DeLong, Paul Krugman, Alice Rivlin, Michael Hudson, and Willem Buiter.

[101] Greenspan responded to his critics in a follow-up article in which he defended his ideology as applied to his conceptual and policy framework, which, among other things, prohibited him from exerting real pressure against the burgeoning housing bubble or, in his words, "leaning against the wind".

Greenspan argued, "My view of the range of dispersion of outcomes has been shaken, but not my judgment that free competitive markets are by far the unrivaled way to organize economies".

"[102] Financial Times associate editor and chief economics commentator Martin Wolf defended Greenspan primarily as a scapegoat for the market turmoil.

Meanwhile, Greenspan recommended improving mark-to-market regulations to avoid having derivatives or other complex assets marked to a distressed or illiquid market during times of material adverse conditions seen during the late 2000s credit crisis.

"[108] Greenspan admitted fault[109] in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected.

[110] He also called Greenspan a "classic con man" who, through political savvy, "flattered and bullshitted his way up the Matterhorn of American power and ... jacked himself off to the attention of Wall Street for 20 consecutive years".

[7] Then-Democratic House Minority Leader Nancy Pelosi added that there were serious questions about the Fed's independence as a result of Greenspan's public statements.

[113] Greenspan also received criticism from Democratic Congressman Barney Frank and others for supporting Bush's Social Security plans favoring private accounts.

[118] Economist Paul Krugman wrote that Greenspan was a "three-card maestro" with a "lack of sincerity" who, "by repeatedly shilling for whatever the Bush administration wants, has betrayed the trust placed in the Fed chairman".

[120][121] Greenspan had used his position as Fed chairman to comment upon fiscal policy as early as 1993, however, when he supported President Clinton's deficit reduction plan, which included tax increases and budget cuts.

[122] In an October 2011 lecture addressing the Occupy movement,[123] Noam Chomsky characterized portions of Greenspan's February 1997 testimony to the U.S. Senate as an example of the self-serving attitudes of the so-called 1%.