Speculation Over Greenspan's Future
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WASHINGTON (AP) - Alan Greenspan (news - web sites) has held what is often called the
second most powerful job in the country for more than 14 years and under four presidents.
Wall Street is beginning to wonder, however, whether the chairman of the
Federal Reserve (news - web sites) will stick around until his current term
ends in June 2004.
"There has been all sorts of speculation that Greenspan is going to resign
early," said David Jones, chief economist at Aubrey G. Lanston & Co. in
New York.
The Blue Chip Economic Indicators forecasting newsletter even polled its
52 top economic forecasters this month for their picks of who should
succeed Greenspan.
Those who believe the chairman may be contemplating an early exit note
that Greenspan will turn 76 next week and would be 78 at the end of his
current term.
They contend this would be the perfect time for Greenspan to bow out
gracefully, with Fed interest rate policy expected to be on hold for much of
this year after its aggressive rate cuts last year aimed at pulling the country
out of recession.
Greenspan was to deliver the central bank's assessment of the state of the
economy Wednesday, which he does twice a year, before the House
Financial Services Committee.
In advance of those remarks, many analysts were betting that Greenspan
would strike an upbeat tone, especially in light of a number of recent
statistics that have flashed strong signals that the country's first recession in
a decade is over.
But analysts believe he will also stress that the recovery, at least in its
initial stages, is likely to be fragile. That would mean the central bank will not feel a need to
move quickly toward reversing its rate cuts of last year with interest rate increases.
All of this should be good news to financial markets.
Because of the widespread view that the economy is on the mend, many analysts think
Greenspan might choose this year or next to bow out. They also say the presidential election
calendar could play a role in his decision.
If Greenspan should wait until his term ends in 2004, it would mean Bush would have to win
approval of Greenspan's successor in the middle of his campaign for re-election, presuming
he intends to see re-election. Senate Democrats might well balk at filling such an important
job in 2004, preferring to wait until 2005 when a Democrat might occupy the White House.
At the White House, Bush's top economic adviser said he puts no credence in speculation that
Greenspan might not finish his term.
"This is at least the 20th time in the last 10 years that there have been rumors in the financial
market that Alan is going to retire," Lawrence Lindsey told reporters last week. "I had lunch
with him yesterday. ... He has no intention of going anywhere."
Lindsey is a former Federal Reserve who served with Greenspan before returning to private
economic consulting in advance of joining the Bush administration. His view also has
supporters among private economists who think Greenspan enjoys the job too much to step
aside early and would do so only if his health started to fail. That is not evident in
Greenspan's still-vigorous tennis game.
"Greenspan's hobby is crunching economic numbers. There is no better place for him to be,"
said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "Personally,
professionally, socially and politically, I don't see any reason he would want to step down."
New York economist Jones also supports the view that Greenspan will stay on the job despite
the persistent market rumors. He said there is no indication that the Bush team is laying
groundwork for a new Fed chairman by planting newspaper stories about possible successors.
"Clearly, the administration will have to prepare the markets for Greenspan's successor given
how important the job is for the economy," Jones said. In 1987, Greenspan was Wall Street's
clear choice to succeed Paul Volcker.
The top choice of the 37 economists who responded to the Blue Chip survey? Treasury
Undersecretary John Taylor, the administration's point man on international economic matters. |
