Can the government bring stability to markets?

According to Alan Greenspan's new biographer, not without moral hazard:

If the Fed responds when markets turn down but doesn’t suppress exuberance when markets are up, private actors will have an incentive to take on more risk than they otherwise would. This can undermine natural market discipline. Mr. Mallaby believes that in his responses to negative shocks, Mr. Greenspan crossed the line from being the “guru”—“the man who knew”—to becoming the “guardian angel.”

BOTTOM LINE:  

“The delusion that statesmen can perform the impossible—that they really can qualify for the title of ‘maestro’—breeds complacency among citizens and hubris among leaders.”