Banking Elites: who will replace Greenspan?


Richard Moore

The New York times seems to think Bush and the Republican
Party will decide who will be the next Fed chairman. I say
that Wall Street would never permit such an all-important
decision to be made by mere politicians.

let's keep our eyes on this one,


October 5, 2005 

Bush Keeps Open Mind on Choice to Run Fed 

WASHINGTON, Oct. 4 - President Bush said on Tuesday that he
had yet to receive a list of candidates to succeed Alan
Greenspan as chairman of the Federal Reserve, cautiously
hinting that he might want to look beyond those already under
consideration at the White House.

With less than four months remaining before Mr. Greenspan is
scheduled to retire at the end of January, Mr. Bush told
reporters at a news conference in the Rose Garden that he
wanted someone independent from politics.

"I, frankly, hadn't seen any, personally hadn't seen any names
yet," Mr. Bush said. "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's comments raised some doubts about the conventional
wisdom in Washington and on Wall Street, which is that the
race to succeed Mr. Greenspan has boiled down to three
principal candidates: Martin Feldstein of Harvard University;
R. Glenn Hubbard, a former top adviser to Mr. Bush; and Ben S.
Bernanke, chairman of the White House Council of Economic

Mr. Bush knows all three of the most widely mentioned
prospects, but Republican strategists say that none is a
perfect fit.

Time is short: the Senate will be busy with the confirmation
hearings of Harriet E. Miers for associate justice of the
Supreme Court, and is expected to adjourn for the year in
early December.

Mr. Greenspan's term expires on Jan. 31, and he has signaled
that he wants to step down on schedule. Although the Senate
banking committee could begin hearings in January, Congress
usually does not reconvene until the end of that month.

Mr. Bush has made it clear he wants to pick a candidate with
whom he has some personal rapport, as he did in nominating Ms.
Miers, a White House counsel and a long-time associate, for
the Supreme Court. But he also wants to choose someone who
provides reassurance to the nation's financial markets, and
Wall Street power brokers want someone who understands capital
markets as well as monetary policy.

Robert H. Rubin, who built a very close friendship with Mr.
Greenspan when he was Treasury secretary under President
Clinton, would reassure Wall Street. But while President Bush
expressed admiration in 2001 for Mr. Rubin, who is now
chairman of the executive committee at Citigroup , Mr. Rubin's
strong support for John Kerry in the last election and his
criticism of Mr. Bush's budget deficits have made him
unthinkable to Republican leaders. These days, they often use
"Rubinomics" as an expletive.

Mr. Bush's decision will be shaped by a small group of his top
advisers: Vice President Dick Cheney, who has a longstanding
friendship with Mr. Greenspan; Andrew Card, Mr. Bush's chief
of staff; Karl Rove, Mr. Bush's domestic policy adviser; and
Joshua B. Bolten, the White House budget director.

Whoever is selected, the next Fed chairman could be end up at
odds with the White House. Fed officials have become
increasingly uneasy about rising budget deficits, particularly
when federal spending tied to Hurricane Katrina shot past $60
billion last month and now appears set to rise well past $100

If the central bank fears that federal borrowing is provoking
higher inflation, the next Fed chairman will face pressure to
slow the economy by raising interest rates.

For all their merits, all three of the most serious candidates
come with some negative baggage. Mr. Feldstein commands
enormous prestige as an academic economist and has deep
Republican ties. But his role as a director at the American
International Group , the troubled insurance conglomerate, has
sent shivers through the White House.

On top of that, some Republicans have never forgiven Mr.
Feldstein for his criticism of deficits when he was chairman
of the Council of Economic Advisers under President Ronald

Mr. Hubbard is passionately devoted to most of Mr. Bush's
economic goals and was a crucial architect of his tax cuts in
2001 and 2003. But Mr. Hubbard's strengths are not in monetary
policy, and some say his relations with Mr. Bush are not
extremely close.

Mr. Bernanke is a highly respected monetary economist and a
former governor at the Federal Reserve. Many Wall Street
analysts say he would be well received by investors. But Mr.
Bernanke is still something of an unknown quantity to Mr.

Mr. Bush's nominee for the next Fed chairman is in many ways
as important as his nominations for justices to the Supreme
Court. With its sway over the nation's money supply and its
ability to set short-term interest rates, the Federal Reserve
directly affects the nation's rate of economic growth, its
pace of job creation and its rate of inflation.

And while the initial appointment is for a four-year term
rather than a lifetime position, several previous chairman
have held the job much longer because of reappointments.

Mr. Greenspan, who has led the central bank for the last 18
years, helped soothe the economy in times of crisis and
oversaw it through a relatively benign period of strong
growth, declining inflation and the lowest interest rates in a

If Mr. Bush wants the Senate to confirm a new chairman before
Congress adjourns this year, he would almost certainly have to
nominate that person by early November.

And if Mr. Bush wants to broaden the search, Republican
strategists said the White House would also need time to float
new names and gauge the response in financial markets.

One person with close ties to the administration said that
White House officials developed a preliminary list of
candidates early this summer that included Mr. Feldstein, Mr.
Bernanke and Mr. Hubbard. Mr. Bush, the person said, has been
presented with some of the names informally.

One of the rejected names may have been that of Lawrence B.
Lindsey, who was Mr. Bush's first director of the White House
National Economic Council but who was fired in December 2002.
Mr. Lindsey, a former Fed governor, remained outspokenly loyal
to Mr. Bush; The Wall Street Journal reported earlier this
summer that he was under consideration for the Fed.

But Mr. Lindsey has little support among current or former Fed
officials, or from many people on Wall Street. If nothing
else, Mr. Bush would be in an awkward position if he nominated
someone to the Fed whom he had dismissed from his own staff.

One Republican strategist and outside adviser to the White
House said he was taken aback when Mr. Bush said on Tuesday he
had not seen a list of candidates. But Mr. Bush also said the
decision-making process was "ongoing," and he broadened the
choices earlier this year by hiring Mr. Bernanke, then a Fed
governor, as his top economic adviser.

People close to the administration said the move was intended
to give Mr. Bush a chance to become more familiar with Mr.
Bernanke, who is a Republican but who had been a professor at
Princeton University with almost no experience in party
politics before moving to the White House.

Unlike nominations to the Supreme Court, the impending
nomination of a new Fed chairman has stirred almost no
ideological battle. The Fed's policy making committee has
always included both Democrats and Republicans, and the
disagreements almost never coincide with party affiliations.

Under Mr. Greenspan, Fed policy makers are sharply divided
about whether the Fed should set a public target for
inflation. Mr. Greenspan, a Republican, has been firmly
opposed. Governor Donald Kohn, a Democrat and a career Fed
official, is also opposed. But Mr. Bernanke, a Republican, is
an outspoken proponent of the idea.

Mr. Greenspan is expected to have some influence on the final
decision, if only in the form of a surreptitious veto power.
If Mr. Greenspan did have his way, some analysts suggest that
his own favorite would be the relatively unknown Mr. Kohn.

Copyright 2005 The New York Times Company 

"Apocalypse Now and the Brave New World"