Administration Considers Delaying Fed Chief's Exit

If Greenspan agreed to stay, it could be seen as "further eroding the barriers that should exist between the White House and the Fed," said Thomas Schlesinger, executive director of the Financial Markets Center, a nonprofit organization that monitors the Fed.

The strategy could create the appearance that Greenspan was in some way being rewarded by the White House for his strong public support of Bush policy priorities such as tax cuts and individual Social Security accounts, said Kenneth H. Thomas, a lecturer in finance at the Wharton School.

The White House's interest in extending Greenspan's run comes as some financial analysts and business leaders have urged administration officials to look for candidates with both his grasp of abstract economic principles and his sense of how the economy evolves in the real world.

Greenspan's fans attribute much of his success to his decades-long experience as a business consultant, which gave him a deeply intuitive understanding of how executives decide whether to invest, hire or raise prices and how financial markets operate.

His predecessor, Paul A. Volcker, highly regarded as the Fed chief who broke the back of double-digit inflation, had worked for Chase Manhattan Bank and did not have a PhD in economics.

By contrast, all of the leading names on the lists of likely Greenspan successors are prominent academic economists, with little or no business experience. That's a source of discomfort for some analysts who praise Greenspan's willingness to question the data, challenge the models and break with economic convention at times.

"There are a number of concerns regarding the choice of an academic Fed chair," said Richard Yamarone, director of economic research at Argus Research Co., an independent financial analysis firm. "Academics tend to reside in 'schools of thought,' with a strict adherence to the theoretical. . . . You cannot execute policy with respect to what should happen. Or what traditional economic theory suggests. [Fed] policy is conducted in the very dynamic real world, with unforeseen shocks and countless outcomes. Far too many to be captured in an econometric model."

A current or former chief executive of a major corporation "would make for an interesting choice," said John J. Castellani, president of the Business Roundtable, an association of such executives, adding that he meant no criticism of the academic candidates.

There is often a difference, he said, "between what the economy is really doing and the theoretical perspective on what it should be doing. . . . A CEO is really at the nexus of monetary policy, demand and the global economy."

That idea sends shudders through economists who remember G. William Miller, a former chief executive with no formal economics background who was Fed chairman for less than two years under President Jimmy Carter, when the average inflation rate exceeded 9 percent.

Miller "was the worst Fed chairman we probably ever had," said William Dudley, chief economist at Goldman Sachs U.S. Economics Research. "It would be nice to have broader experience, but we don't want to hire someone without solid economic grounding."

Fed board members in the past have stayed on the job while awaiting confirmation of a successor. Greenspan himself was chairman "pro tempore" for several months in 1996, after his second term as chairman expired and before he was confirmed for a third; his board term continued throughout.