- The Washington Times - Tuesday, October 4, 2005


The search to replace Federal Reserve Chairman Alan Greenspan has begun, said President Bush, whose staff will seek outside advice on a successor who will maintain the central bank’s independence from party politics.

“It’s this independence of the Fed that gives people, not only here in America but the world, confidence,” Mr. Bush said yesterday at a White House press conference.

Mr. Greenspan’s nonrenewable term ends Jan. 31, when he will attend what probably will be his last meeting of the policy-making Federal Open Market Committee. Mr. Bush has the opportunity to select the 14th Fed chairman, a position that will be responsible for guiding the country’s economy during the next four years.

“There’s an ongoing process,” Mr. Bush said. “I, frankly, hadn’t seen any — personally hadn’t seen any names yet because part of the process is to surface some names internally, but also part of the process is to reach outside the White House and solicit opinions.”

Mr. Bush said his advisers are compiling names of potential successors and the next chairman’s name will be announced at “the appropriate time.”

Selecting a Fed chairman who is perceived to be apolitical may not be easy for Mr. Bush, particularly because most of those considered the favorites for the job work for him now or served in his first term, said Tom Schlesinger, executive director of the Financial Markets Center, a Philomont, Va., group that monitors the Fed.

Potential candidates for the top Fed post include Ben Bernanke, chairman of Mr. Bush’s Council of Economic Advisers, and Martin Feldstein, a Bush adviser on private Social Security accounts, according to a poll of 104 Wall Street professionals conducted last month by Stone & McCarthy Research Associates, a Skillman, N.J., economics firm.

Lawrence Lindsey and Glenn Hubbard, both of whom served on Mr. Bush’s economic team during his first term, also were on the list of potential candidates.

“The White House is vulnerable to the perception that it is prone to picking insiders, cronies and folks with a political ax to grind,” Mr. Schlesinger said.

Mr. Lindsey is “the most political-minded of the four individuals who are on the list right now,” he said. Mr. Feldstein “is closely identified with Republican administrations going back to Reagan,” Mr. Hubbard took “the lead on tax issues for the Bush team” from 2001 to 2003, and Mr. Bernanke is speculated to have taken the CEA job earlier this year to prove “that he’s tough enough and compliant enough to get tapped for a bigger job at the Fed,” Mr. Schlesinger said.

Mr. Greenspan, 79, who became Fed chairman in 1987, maneuvered the economy through two stock-market collapses, in 1987 and 2000, and two recessions in 1990-91 and in 2001. The expansion between those declines was the longest in U.S. history.

The Fed is in its fourth cycle of raising interest rates since Mr. Greenspan became chairman. Fed policy-makers increased the benchmark U.S. interest rate for an 11th straight time Sept. 20, to 3.75 percent, and restated a plan to carry out further increases at a “measured” pace.

The next Fed chairman will face a series of challenges, especially whether to continue raising interest rates. A new leader at the Fed also will influence how the central bank communicates with financial markets, the prospects for adopting a numerical inflation goal, and the Fed’s strategy for dealing with crises.

Mr. Greenspan has followed a “risk management” approach that involves adjusting policy to offset risks that could threaten economic stability.



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