Bush Picks Bernanke As New Fed Chairman
Forbes | October 24, 2005
President Bush on Monday selected Ben Bernanke, chairman of the president's Council of Economic Advisers, to replace Alan Greenspan as Fed chairman, according to an administration official.
The official spoke on condition of anonymity because the nomination had not yet been announced. Bush was to announce his choice at 1 p.m. EDT, said White House spokesman Scott McClellan.
Greenspan, who took over in August 1987, wraps up his term as chairman Jan. 31. Asked about Greenspan's successor, Bush said, "We'll be making an announcement soon."
McClellan, while not identifying Bush's choice, said the individual he had selected was "someone who is highly qualified and someone who is well respected."
Bernanke, 51, is a former member of the Fed board. He also was a professor at Princeton University and chairman of the economics department.
Bernanke and Greenspan differ on whether the Fed should set targets for inflation - Bernanke thinks it should, Greenspan does not - but otherwise they share a similar philosophy. In fact, while he was at the Fed, market observers would often look at Bernanke's speeches for insight into Greenspan's thinking.
There had been widespread speculation that Bush might act as early as this month to give the Senate time to confirm the nomination before Greenspan's term expired.
However, announcing Greenspan's successor also provided a diversion for a White House reeling under congressional criticism of the Harriet Miers' Supreme Court nomination and a federal investigation into whether top officials leaked the name of a CIA operative for political purposes.
Wall Street reacted favorably to word that Bernanke was Bush's pick. The Dow Jones industrial average jumped 60 points minutes after Bernanke's name leaked out and was up 110 points at midday.
The Senate Banking Committee, which must vet the nomination, expects to move quickly, spokesman Andrew Gray said. If all goes smoothly, work on the nomination could be completed before the Senate adjourns for the year in late November or December, Gray said.
Sen. Charles Schumer, the highest-ranking Democrat on the committee, had a positive initial reaction.
"We need a careful, non-ideological person who understands that the Federal Reserve's main job is to fight inflation and Ben Bernanke seems to fit that bill," he said.
Bernanke has a reputation as a straight-talking economist and a Republican who avoids telegraphing any ideology.
In June 2005, Bernanke was sworn in as chairman of the President's Council of Economic Advisers. He had served as a member of the board of governors of the Fed since August 2002,
A summa cum laude graduate of Harvard University in 1975, he received his doctorate from the Massachusetts Institute of Technology in 1979. During his years in Boston, he focused on the economic underpinnings of the Great Depression and the losing track record of the city's beloved baseball team, the Red Sox.
"Economics is a very difficult subject," Bernanke once said. "I've compared it to trying to learn how to repair a car when the engine is running."
Greenspan was 61 when he first took over the demanding job as Fed chairman.
His first government service was as chairman of the president's Council of Economic Advisers during the Ford administration. He had originally been tapped for that post by Richard Nixon, who resigned before Greenspan took office.
He joined the government after a long stint running Townsend-Greenspan, a New York consulting firm which had as its clients some of the country's top corporations.
It was during this period that he gained a reputation as an economist who loved to delve into the minutia of economic data, from monthly box car loadings to steel production data to try to determine the future direction of the economy.
He pursued his Fed job in the same way, often calling economists at other agencies to discuss the fine points of the government statistics. He would rise early every morning for a two-hour soak in his bathtub, time he used to devour the latest government statistics and Fed staff memos on the economy.
Greenspan succeeded another Fed legend, Paul Volcker, who during his eight years at the Fed had pushed interest rates up to their highest level since the Civil War in a successful effort to break a decade-long bout of inflation but also pushed the country into the deep 181-82 recession.
Greenspan never had to resort to pushing interest rates so high, mainly because during his tenure inflation never soared to the double-digit rates that Volcker confronted.
The economy did suffer two recessions during Greenspan's long tenure at the Fed, a 1990-91 downturn that occurred in part because of a huge spike in oil prices following Iraq's invasion of Kuwait, and a 2001 downturn that was worsened by the deadly terrorist attacks on the World Trade Center and the Pentagon.
It was under Greenspan that the central bank began in 1996 for the first time to announce on the day of its meeting whether it had made any changes to the short-term interest rates the Fed controls.
While technically Greenspan only had one vote on the 12-member Federal Open Market Committee, the Fed chairman was exceptionally adept at building consensus among the Fed board members and regional bank presidents who make up the panel that meets eight times a year to set interest rates.
He also demonstrated a keen mastery of Washington's political power games. His long tenure at the Fed was due in no small part to his ability to get along with whoever occupied the White House.
A lifelong conservative Republican, Greenspan was first selected as Fed chairman by Ronald Reagan in 1987. He was re-nominated by the senior George Bush, also a Republican, and won two more selections for four-year terms by Bill Clinton.
Last modified October 24, 2005