Can the Market Still Bet on the ‘Greenspan Put’?

Protect investors against price falls, it stems from the recognition that the effects of a stock market crash threaten monetary-policy goals and, therefore, the Fed should step in and help.

It started with the Black Monday crash in 1987, when the S&P 500 plummeted 20% in a day.

Greenspan was on the phone that night calling around to the leading banks and telling them, ‘I don’t want any clearinghouse to fail. I don’t want any brokerage firm to go under. You lend to the clearinghouses whatever you need, and we’re going to back you’,”  Lester Telser told an oral history project at the University of California, Berkeley.

In 1929 the Fed did the opposite, tightening monetary policy after stocks crashed, because it was concerned about the outflow of gold. 

Bank failures and the Great Depression ensued.

Critics argue that the Fed Put creates moral hazard, as investors grow to expect the Fed to step in and so take risks they would otherwise be unwilling to take.  

The Fed has demonstrated that it will rescue even midsize financial institutions to save depositors from their bad choice of bank. 

The Put is currently on hold. If the next stock market downturn is severe enough to threaten the economy, and so lower inflation, I’d expect the Fed Put to make a rapid reappearance.

But I doubt a mere 20% fall would be enough.

James Mackintosh Wall Street Journal June 23, 2026

https://www.wsj.com/economy/central-banking/can-the-market-still-bet-on-the-greenspan-put-f3e19238

Moral hazard is back on the agenda; should central banks cave to markets? 

https://englundmacro.blogspot.com/2024/08/moral-hazard-is-back-on-agenda-should.html

1929

https://englundmacro.blogspot.com/2025/09/crash-of-1929-it-was-fomo-plus-debt-its.html

https://englundmacro.blogspot.com/search?q=1929