- The Washington Times - Sunday, June 5, 2005

Wanted: expert with a deep understanding of what makes the economy tick.

Must have credibility with Wall Street and the ability to deal deftly with financial turmoil, anytime, anywhere. Politically adept. A consensus builder. Unflappable. Business experience welcome, but not required.

If interested, contact 1600 Pennsylvania Ave., Washington, D.C. Attn: President Bush.

Picking Alan Greenspan’s successor as chairman of the Federal Reserve will be one of Mr. Bush’s most important tasks. Mr. Greenspan, 79, has led the Fed since 1987. He is expected to step down Jan. 31.

The next chairman will play a crucial role in steering the world’s largest economy so that it grows solidly and produces jobs without fanning inflation.

Fed experts say it is critical for Mr. Greenspan’s successor to maintain the central bank’s independence from political influence.

“Politicians like low interest rates. That’s a fact of life,” said Susan Phillips, a former member of the Federal Reserve Board.

“The ability to be able to raise rates even though politically unpopular is very important to the long-run well-being of the economy,” said Ms. Phillips, dean of the George Washington University School of Business.

Three persons so far are drawing frequent mentions as possible successors to Mr. Greenspan. Each is a respected economist with a firm sense of how Washington works.

• Martin Feldstein, 65, is an economics professor at Harvard University and president of the National Bureau of Economic Research. He advised Mr. Bush when the Texas governor ran for president in 2000.

Mr. Feldstein says Mr. Bush’s tax cuts have helped the economy recover from the recession of 2001. Mr. Feldstein also has endorsed the president’s plan to overhaul Social Security, including letting workers set up personal investment accounts.

Mr. Feldstein served as chairman of the Council of Economic Advisers from 1982 to 1984, during the Reagan administration. He often found himself at odds with the White House, however, over his persistent warnings about the negative effects of budget deficits.

• R. Glenn Hubbard, 46, is dean of Columbia University’s graduate school of business and an economics professor. He was Mr. Bush’s chief economic adviser from 2001 to 2003.

Among the policies Mr. Hubbard helped shape was the reduction of taxes that investors pay on stock dividends. Congress in 2003 acted to cut taxes on some dividends. He also promoted Mr. Bush’s idea for personal investment accounts.

Mr. Hubbard worked for the first President Bush as deputy assistant Treasury secretary for tax analysis.

Mr. Feldstein was one of the supervisors on Mr. Hubbard’s dissertation for his doctorate in economics at Harvard.

• Ben Bernanke, 51, has served on the Fed board since August 2002. Mr. Bush picked Mr. Bernanke in April to be chairman of the Council of Economic Advisers. Mr. Bernanke is awaiting Senate confirmation.

“Economics is a very difficult subject,” Mr. Bernanke once said. “I’ve compared it to trying to learn how to repair a car when the engine is running.”

Mr. Bernanke also was a professor at Princeton University and chairman of the economics department.

At the Fed, Mr. Bernanke has pushed for the central bank to be more specific in its inflation objectives. Mr. Greenspan has opposed setting a numerical target for inflation.

Mr. Feldstein and Mr. Hubbard are connected to the business world through their work on corporate boards. Mr. Bernanke has not held a post on a company’s board of directors.

One of the boards that Mr. Feldstein serves is American International Group Inc., the insurer that is under investigation by state and federal regulators over accounting issues.

As Fed chairman, Mr. Greenspan helped Mr. Bush by endorsing the president’s tax cuts in 2001. More recently, the Fed chief came down on the side of Mr. Bush’s proposal for personal accounts as part of a revamp of Social Security.

Can Mr. Bush count on such support from the next Fed chairman?

“I’m sure Bush is not going to pick someone who he knows has been criticizing his economic policies. But that doesn’t necessarily mean it has got to be somebody who think every single decision that he had made is right,” said Anil Kashyap, an economics and finance professor at the University of Chicago Graduate School of Business.


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