Alan Greenspan’s reputation has been tarnished by the US subprime mortgage crisis and its spreading economic fallout. A best-selling autobiography has not persuaded critics of the former chairman of the Federal Reserve Board. They say he was on the wrong track when he endorsed low interest rates and ignored asset price bubbles.

When it comes to the fallen guru’s bank account, though, the credit crunch doesn’t seem to have hurt. Royalties from the book would probably be enough to keep the 81-year-old comfortable for the rest of his life, but he has also been able to sign up a few consulting clients.

The latest is Paulson and Co. Greenspan is set to join the New York-based hedge fund manager’s advisory board. John Paulson made something in the order of $3 billion (Rs11,790 crore) in 2007, largely through short positions in mortgage-backed securities. His great insight came in 2005, when Greenspan was still in charge at the Fed. The hedge fund manager took the narrowing credit spreads of bankrupt US auto suppliers as a sign that there was a credit bubble waiting to pop. Greenspan argues that the credit expansion was an unavoidable side effect of the urgent fight against a possible deflationary spiral. Paulson says he agrees. “The decisions he made at the time were right,” he told The Wall Street Journal. (WSJ has an exclusive content partnership with Mint in India.) But a cynic might be tempted to look at it another way. Greenspan’s Fed was lax in monetary policy, enthusiastic about new financial instruments and negligent of the Federal Reserve Board’s responsibility to regulate bank lending.

The mix not only created a housing bubble, but also made it easy to place highly leveraged bets that it would end catastrophically. If so, then Paulson owes much of his fortune to Greenspan. Perhaps the consulting contract is a small token of his appreciation.