- The Washington Times - Sunday, November 28, 2004

While President Bush is busy putting together his Cabinet for a second term, the financial world’s attention is on a job vacancy 14 months away: Who will succeed Federal Reserve Chairman Alan Greenspan?

It might seem daunting to follow a legend such as Mr. Greenspan, who is in his 18th year in the job. Yet there seem to be plenty of people who would like to do it.

The list of candidates talked about in Washington and on Wall Street is half what it had been before the Nov. 2 election, when prominent Democrats such as former Treasury Secretary Robert Rubin were considered hot prospects had Massachusetts Sen. John Kerry won the White House.

With Mr. Bush’s re-election, the focus is on Republicans. Candidates include Harvard University economics professor Martin Feldstein, chairman of the Council of Economic Advisers during the Reagan administration; Columbia University professor Glenn Hubbard, who was Mr. Bush’s first CEA chairman; Treasury Undersecretary John Taylor; and Federal Reserve Board member Ben S. Bernanke.

Analysts generally put Mr. Feldstein, 65, at the top of the list, in part because he is the best known. He has had a distinguished teaching career at Harvard and served from 1982 to 1984 as chairman of the CEA, a post that Mr. Greenspan used as a stepping stone to the Fed job.

Some say Mr. Hubbard, at 46 the youngest on the list, might have an inside track because of his strong support for Mr. Bush’s tax cuts. Also, doubts linger among some conservative Republican supply-siders about Mr. Feldstein, because of his reputation as a deficit hawk.

Mr. Taylor, 57, gained prominence as a monetary analyst at Stanford University before coming to Treasury. He developed the “Taylor rule,” a formula designed to aid the Fed in setting interest rates. He has had trouble influencing the administration’s economic policy in his current job.

Mr. Bernanke, 50, is viewed as the dark horse. Little known outside academic circles before coming to the Fed board in August 2002, he has impressed veteran Fed watchers, who have started to read his speeches carefully for insights into the board’s thinking on a range of economic issues.

Many think Mr. Greenspan will play a large role in choosing his successor.

“I think that Mr. Greenspan will have an unusually large influence on the selection process given his close relationship with Vice President Cheney, going all the way back to the Ford administration,” said David Jones, author of four books on the Greenspan Fed.

Mr. Greenspan was President Ford’s CEA chairman and Dick Cheney was Mr. Ford’s White House chief of staff.

Many see Mr. Greenspan’s hand in appointments Mr. Bush has made to the Fed board, including Mr. Bernanke and Donald Kohn, a longtime Fed staff member on monetary policy.

“Greenspan has done a great job and weathered a lot of storms during his tenure at the Fed, with only two recessions, and both of them relatively mild,” said David Wyss, chief economist at Standard & Poor’s.

Mr. Greenspan became Fed chairman on Aug. 11, 1987, when he was picked by President Reagan to succeed Paul Volcker.

In June, Mr. Greenspan started his fifth four-year term as chairman. He has let it be known that he does not intend to serve past the end of his current term and a separate 14-year term on the Fed board, which ends Jan. 31, 2006.

Mr. Greenspan was by far the front-runner in 1987 and virtually the only name mentioned on Wall Street. That several names are circulating now does not prove anything because it still is early in the process, analysts said.

“I am not at all surprised that we are still talking about four or five possible replacements,” said Lyle Gramley, a former Fed board member. “It is a little early to have a single candidate, given all the other things the president has to worry about right now.”

Many analysts say it could be this time next year before the White House announces a nominee to succeed Mr. Greenspan. The Senate must confirm the nomination.

Analysts tend to dismiss the idea that a candidate might find succeeding Mr. Greenspan a daunting task.

“People said how tough it was going to be for Greenspan to succeed Volcker, but within a few months he had settled in, and pretty soon he was his own legend,” said Ted Truman, a longtime director of international affairs at the Fed who is now at the Institute for International Economics.

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