Who will replace Greenspan
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Alan, adieu?
WASHINGTON -- It is difficult to exaggerate the aggravation at the White House over Alan Greenspan's gratuitous shot at President Bush's tax cuts. So angry are the president's advisers that they are willing to consider not reappointing Greenspan next year to a final term as chairman of the Federal Reserve Board.
The conventional wisdom is that shaky financial markets could not withstand the loss of Dr. Greenspan, exalted in Wall Street as master of the universe. Similar predictions about non-reappointment of past Fed chairmen Paul Volcker and Arthur Burns proved groundless. With the expiration of Greenspan's chairmanship 16 months away, adverse impact on investors could be discounted by early disclosure of the president's intentions.
Greenspan's prestige is so overpowering that hand-wringers will tell Bush that he dare not prevent Greenspan from serving his final two years at the nation's central bank. Still, senior officials privately mention Robert Glenn Hubbard, chairman of the Council of Economic Advisers, as a possible replacement. A more conventional choice they ponder is William McDonough, the Fed's second-ranking official as New York Federal Reserve Bank president. Furthermore, the White House is in the market for additional names.
The White House and the independent Federal Reserve have been in an effective non-aggression pact for two decades. Since the middle of the Reagan administration, the White House has said nothing about the Fed's handling of monetary policy. Accordingly, Greenspan could unwisely tighten money in the face of a coming recession with impunity.
In return, Greenspan has assented to any fiscal policy by any president -- from Bill Clinton's 1993 tax increase to George W. Bush's 2001 tax cut. In a departure, however, Greenspan's recent testimony to Congress placed him in a clearly adversarial relationship with the president. On Feb. 11, he told the Senate Banking Committee there was no need for the Bush tax cuts and warned of increasing budget deficits.
That was something Bush and his inner circle did not expect or appreciate, and Greenspan's characteristic modification in House testimony Feb. 12 earned him a rebuff from Democrats but not a reprieve from the White House. He had made it harder for Bush to win his major domestic initiative.
Consequently, senior White House aides began to consider the decision the president soon will face. Although only two Fed governors have completed the single 14-year term since it was established in 1936, Greenspan has served on the board nearly 15 years -- six years filling an expired term and nine years for a full-term. The 14 years end in 2006, and Greenspan cannot be reappointed. His latest four-year term as chairman expires June 20, 2004. Thus, Bush must decide whether to give Greenspan a fifth term as chairman, which would be cut short after two years.
Given this situation, the White House yearns for a new face at the Fed -- such as Glenn Hubbard. The Bush inner circle was not happy about Hubbard's feud with Lawrence Lindsey, then the national economic adviser. Nevertheless, Hubbard survived the purge of the Bush economic team, and was dispatched by the White House Feb. 12 to answer Greenspan's claim that the Bush tax cut is "premature." Hubbard, a Harvard Ph.D. economist who is only 44 years old, would be an articulate young voice at the Fed.
McDonough, who has announced his retirement from the New York Fed effective in July after an unusually long 10 years in charge there, would be a safer pick than Hubbard. A nominal Democrat who admires and supports Bush, he was considered for secretary of the Treasury late last year. He is a traditional central banker well respected by the investor community. McDonough is 68 years old, but that is nearly a decade younger than Greenspan, who celebrates his 77th birthday March 6.
"You have been in this position for a long time, some would say too long," Republican Sen. Jim Bunning told Greenspan after he criticized the tax cuts. That sentiment is shared at the White House, which wants Hubbard, McDonough or any Federal Reserve chairman who will not be a back shooter. The question is whether Bush has the nerve to fire Alan Greenspan and the skill to get away with it.
townhall.com
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Greenspan could retire early - report
onbusiness.ie
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Who will be the next fed chair?
John Taylor?
Ironically, one of the likeliest candidates for the job is also the least well-known. Stanford professor John Taylor, currently the Treasury under secretary for international affairs, is a star in economics circles, but a relative unknown on Wall Street.
In fact, Bush asked Taylor to chair the White House Council of Economic Advisers, but he turned the job down, choosing a relatively obscure post in the Treasury Department -- a job held, coincidentally, by previous Fed chairman Paul Volcker.
"I'm not sure Taylor has the political savvy for the job," said former Fed economist Wayne Ayers, now chief economist at Fleet Boston Financial. "Greenspan had been in Washington a long time and had a solid reputation. It was no surprise when Volcker was replaced by Greenspan because he was the obvious choice waiting in the wings."
William McDonough, Roger Ferguson and other candidates at the Fed
Three of the past five Fed chairmen have come from the New York Fed district, and William McDonough certainly has made a name for himself as president of that jurisdiction since 1993.
But McDonough, 68, plans to leave the Fed in July 2003, and it's unclear if he'd be willing to take Greenspan's job in 2004.
He's also a Democrat, as is Fed Vice Chairman Roger Ferguson.
Ferguson might in a sense seem a logical replacement for Greenspan, but history is also against him -- no vice chairman has ever ascended to the position of chairman.
money.cnn.com
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Martin Feldstein?
Message 19860037
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McDonough?
money.cnn.com
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My Choice:
$Ben Bernanke
$Ben "The Gambler's Friend"
dailyprincetonian.com
From 2002
Ben Bernanke, chair of the University's economics department, will today move one step closer to the desk of Alan Greenspan.
The White House is expected to announce officially today that Bernanke has been nominated for the Federal Reserve's Board of Governors, senior White House officials said yesterday.
President Bush has decided to nominate Bernanke to one of two vacant positions on the seven-member board. Bush will nominate longtime Fed staffer Donald Kohn to fill the second post.
Bernanke declined to comment yesterday.
Several of his colleagues in the economics department said he is an excellent choice for the position, citing his expertise in monetary policy and scholarly achievements.
"I think it's a wonderful thing from the standpoint of the country's monetary policy because Professor Bernanke is . . . one of the preeminent monetary economists of his generation," economics professor Burton Malkiel GS '64 said.
Another colleague of Bernanke, Uwe Reinhardt, added he was pleased by Bernanke's appointment because it demonstrates that such appointments are not based solely on political considerations.
"He got there strictly by scholarly merit," Reinhardt said. "His research has always focused on the real world."
Economics professor Alan Krueger said Bernanke's background in monetary policy would benefit the Fed board.
"He has a great set of skills that the board could desperately use," Krueger said.
In addition to academic experience, Bernanke has previously delivered presentations at Federal Reserve meetings and served as a member of the National Bureau of Economic Research — a private research organization comprising a select group of economists. Bernanke is also editor of the American Economic Review.
Even before Bernanke had gained a spot on the board, several top economists have considered him a potential successor to Fed chairman Alan Greenspan.
Reuters reported in February a survey of economic forecasters that included Bernanke on a list of potential successors to the chairman.
If Bernanke's nomination is approved by the Senate, several of his colleagues said he might be in a good position to replace Greenspan. The Fed chairman will be 78 when his current term as Federal Reserve chairman ends in June 2004.
Reinhardt said that Bernanke's appointment to the board is a "stepping stone" in that direction.
"I don't think that Alan Greenspan would be reappointed," he said.
Reinhardt added that if the Senate approves Bernanke's nomination, he would be in an advantageous position for gaining the top spot.
"It gives [Bernanke] a chance to think about it and [the administration] a chance to look him over," he said.
However, Bernanke may not be the only Princetonian who could follow Greenspan.
Economics professor Elizabeth Bogan suggested professor Alan Blinder '67 — the Fed's vice chairman from 1994 to 1996 — as another possible choice for the top job.
"Ironically, Princeton has two people who would be an excellent replacement [for Greenspan]," Bogan said.
Professors in the economics department agreed that if appointed to the Fed, Bernanke would be missed by the University.
Economics professor Lars Svensson said that Bernanke would be a good replacement for Greenspan. "He would be a fantastic chair," he said. However, Svensson added that "there are lots of politics involved" that might prevent Bernanke from attaining the position.
Svensson also said that were Bernanke to fill Greenspan's empty seat, his presence would be missed at the University.
"It's a big loss to the department not having him around," he said. "But I guess it's really good for the country."
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Hmmm - Let's see
$Ben was appointed by Bush
$Ben seems to be well liked
$Ben has not stuck his foot in his mouth criticizing Bush like Greenspan did
If Bush wants easy money with no criticism who better than $Ben the Gambler's Friend?
Mish |
