Bush Picks Adviser as Greenspan's Successor

Greenspan, by contrast, spent several decades running his own business consulting and forecasting firm, developing an intuitive feel for how executives make decisions about hiring, investing and setting prices.

Greenspan's experience helped him pass his first big test, the October 1987 stock market crash, which occurred just two months after he was first confirmed as Fed chairman. His actions then were widely credited with quickly stabilizing financial markets.

Almost a decade later, that background helped Greenspan understand before his Fed colleagues did that the productivity of U.S. workers was surging. Based on this conviction, Greenspan led the Fed, over internal protests, to hold interest rates lower in the second half of the 1990s than many economists thought advisable, allowing unemployment to fall to the lowest level in generations while keeping inflation contained.

Bernanke, if confirmed, "will replace a legend," said Bush, who thanked Greenspan for attending the Oval Office event. The Fed chairman said "thank you" but did not comment further. He separately issued a statement calling Bernanke's nomination "a distinguished appointment."

"Ben comes with superb academic credentials and important insights into the ways our economy functions," said Greenspan, who himself replaced a legendary Fed chairman, Paul A. Volcker.

Bernanke may not have Greenspan's rsum, but "he has the same objectives, which means there will be a lot of continuity of policy," said Mickey Levy, chief economist at Bank of America Corp. "It's not enough that he has a superb academic background, it's that he is able to harness that toward leading the Fed toward the right objectives."

Bernanke became chairman of the president's Council of Economic Advisers in June after three years on the Fed's board of governors. He became known at the Fed as an advocate for greater openness about the central bank's deliberations, actions and policy intentions.

He argued that the Fed should establish a numerical target range for inflation over time, with some flexibility to divert from the goal in the short term in response to changing economic conditions. Greenspan opposes the idea, but the disagreement did not cause a rift between the two men.

Greenspan, 79, served as CEA chairman under President Gerald Ford and was first appointed to run the Fed by President Ronald Reagan. He was reappointed by President George H.W. Bush, President Bill Clinton and last year by President Bush. He plans to chair the Fed's meeting Jan. 31, his last day in office.

The Fed's monetary policy -- the use of interest rates to promote healthy economic growth while keeping inflation low -- has not been a subject of partisan differences in recent years.

The Senate Banking Committee will likely hold confirmation hearings before Congress adjourns this year, perhaps before Thanksgiving, said Chairman Richard C. Shelby (R-Ala.).

Bernanke "is a good appointment, a highly qualified individual" for the job, Shelby said. The nominee will be "thoroughly questioned but also well received by all members of our committee."

Sen. Paul S. Sarbanes (Md.), the ranking Democrat on the committee, said Bernanke "brings a lot of credentials to the nomination," but added that he would want to hold a "very thorough hearing to explore his views to assure ourselves of his independent judgment."

The Fed chairman is appointed by the president and confirmed by the Senate to a four-year term. But the chairman is supposed to act independently of political pressure when the Fed adjusts interest rates.

Greenspan has often entered into partisan economic policy debate outside the area of the Fed's mandate, irritating lawmakers on both sides of the aisle. He angered Republicans in the 1990s by helping win support for President Clinton's budget-reduction efforts. He drew Democratic criticism in recent years for his support of Bush administration priorities, such as extending the recent tax cuts and creating private Social Security investment accounts.

Senators likely will use the confirmation process to explore whether Bernanke would do the same.

Even while working at the White House, Bernanke has not appeared unduly close to the Bush administration, Dudley said. This "does suggest that he has more political acumen than some might give him credit" for, he said.