Bush Picks Adviser as Greenspan's Successor
Tuesday, October 25, 2005
President Bush yesterday named his top economic adviser, Ben S. Bernanke, to succeed Federal Reserve Chairman Alan Greenspan, who steps down Jan. 31 after helping guide the U.S. economy for more than 18 years.
Bernanke, 51, who served as a Fed board member and once chaired Princeton University's economics department, "is the right man to build on the record Alan Greenspan has established," Bush said to reporters in the Oval Office yesterday.
Bernanke assured listeners that Greenspan's coming retirement will not trigger any significant shift in the Fed policies -- primarily the adjustment of interest rates -- that have helped deliver solid economic growth, low inflation and low unemployment for much of the past two decades.
"My first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years," Bernanke told reporters, as the Fed chairman stood a few feet away. "If confirmed by the Senate, I will do everything in my power, in collaboration with my Fed colleagues, to help ensure the continued prosperity and stability of the American economy."
Stock prices rose yesterday as Wall Street welcomed the selection of a highly regarded economist who has focused his academic career on studying Fed policy, whose thinking is well known to financial markets and who would arrive with recent experience working with Greenspan at the Fed, analysts said.
"Bush has probably made the best choice among the top contenders for the post and one that is likely to reassure financial markets," said Nariman Behravesh, chief economist at Global Insight, a financial advisory firm.
That kind of reaction contrasted sharply with the continuing criticism by many administration supporters of Harriet Miers, Bush's Supreme Court nominee.
However, White House officials had acknowledged in recent weeks that they had not found an ideal nominee in Bernanke or in other publicly discussed candidates because none had experience working in financial markets or in business. Before joining the Fed in 2002, Bernanke spent his entire professional career in academia.
White House officials had hoped to find a successor to Greenspan who could similarly serve as a cool and effective crisis manager, particularly in view of several looming economic challenges.
They include managing the nation's growing trade deficit, a possible cooling of the housing market and continued high energy prices. Consumers have record debt and low savings. And average wages for most workers are lagging behind inflation, which surged last month at the fastest rate in 25 years.
Fed officials may still be debating early next year whether they should continue raising interest rates to keep inflation under control.
An academic by nature, Bernanke might be strongly wedded to his theories or models of "how the world works, which increase the risks of mistakes, and he has not been tested in a crisis," said William C. Dudley, chief U.S. economist for Goldman Sachs U.S. Economics Research.