And Then the Roof Caved In

Chapter 1

Bubble to Bubble

 

 

 

On the morning of September 12, 2001,Alan Greenspan, chairman of the Federal Reserve, was hurriedly returning from overseas. No planes were flying into the United States that day, other than his. Before landing in Washington, D.C., Greenspan asked the pilot to fly over the felled towers of the World Trade Center in downtown New York City. As Greenspan viewed the devastation from above, he was deeply concerned about the U.S. economy. Greenspan’s overriding fear was that it would simply cease to function. “History has told us that this kind of a shock to an economy tends to unwind it. Because remember, economies are people meeting with each other. And you had nobody engaging in anything. I was very much concerned we were in the throes of something we had never seen before,” recalls Greenspan.

When those planes hit the towers, the U.S. was already in a recession. It was a mild recession, to be sure, but a recession all the same.The United States was suffering from the deflation of one of the greatest speculative bubbles our markets had ever seen. It was quite a party while it lasted. Hundreds of billions of dollars had been thrown at technology companies of all kinds in a frenzy that defied all logic and all the tenets of prudent investing. Few thought we would ever see a bubble of its kind again.

The technology bubble was very kind to CNBC. Our ratings were routinely above those of any other cable news network and almost all of our viewers, save those ...