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, rkm -------------------------------------------------------- http://www.nytimes.com/2005/10/05/business/05fed.html October 5, 2005 Bush Keeps Open Mind on Choice to Run Fed By EDMUND L. ANDREWS 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 Advisers. 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 billion. 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 Reagan. 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. Bush. 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 half-century. 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 -- http://cyberjournal.org "Apocalypse Now and the Brave New World" http://www.cyberjournal.org/cj/rkm/Apocalypse_and_NWO.html
