Federal Reserve Chairman Alan Greenspan said he would accept a fifth term should President
George W. Bush reappoint him, putting to rest talk that the 77-
year-old central banker might bow out next year.
“The president and I have not discussed this, but I greatly
appreciate his confidence,” Greenspan said in a short statement.
“If President Bush nominates me, and the Senate confirms his
choice, I would have every intention of serving.”
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Bush praised Greenspan yesterday and said he deserved another
term as Fed chairman. That comforted investors, who pushed stocks
up on expectations that Greenspan would help steer the economy
back to robust growth. Resolution of the succession issue comes as
the economy is struggling with weak growth, job losses and other
threats to expansion ranging from terrorism to corporate
accounting scandals.
“He’s an extraordinary leader of the Fed and a great asset
for the country,” said former Fed governor Laurence Meyer, who is
now a visiting scholar at the Center for Strategic and
International Studies. “I’ll sleep better for the next couple of
years. He’s got great judgment, is in good shape, and he’s a
leader. Markets will be more confident that he’s at the helm in
this rocky economic period.”
Greenspan has led the central bank since August 1987 and his
current term as chairman expires in June 2004. He is also serving
a 14-year term as a Fed governor that ends Jan. 31, 2006.
In an interview with financial magazine reporters yesterday,
Bush complimented Greenspan’s performance and said, “I think
Greenspan should get another term,” according to a White House
transcript.
White House spokeswoman Claire Buchan said today that while
no formal invitation has yet been extended to Greenspan, it is at
this point “a mere formality.”
“His remaining as chairman would be excellent news for the
economy and the country,” said Lyle Gramley, a former Fed
governor under Greenspan who is now a senior adviser to Schwab
Capital Markets in Washington. “He’s been a terrific chairman, he
commands respect all over the world and in financial markets, is
appreciated by his colleagues and has lost none of his mental
ability.”
Greenspan, who today is at home recovering from what the Fed
called “routine and successful” prostate surgery yesterday, had
come under fire from administration officials for his recent
suggestion that Bush’s tax-cut package wasn’t needed to boost the
economy and would worsen the budget deficit. That had raised
speculation about how long Greenspan would run monetary policy in
the world’s largest economy.
First appointed chairman in 1987, Greenspan is the second-
longest serving head of the central bank after William McChesney
Martin, who led the Fed for 19 years until 1970.
Greenspan oversaw the longest expansion in U.S. history
during the 1990s, navigated the economy through two recessions and
helped insulate the U.S. from the Asian financial crisis of the
late-1990s.
More recently, Greenspan has been forced to defend the Fed
from criticism that it didn’t do enough to prevent a stock market
bubble and market crash. The Dow Jones Industrial Average has
declined 30 percent from its January 2000 peak.
The economy has also struggled with the overhang of the 1990s
investment boom even as the Fed cut its benchmark overnight bank
lending rate a dozen times since January 2000 to a 41-year low of
1.25 percent. Gross domestic product expanded at an annual rate of
just 1.4 percent in the final quarter of last year. The Fed’s own
regional survey of the U.S. economy published today called growth
“lackluster.”
Fed policy makers are forecast to hold rates steady when they
meet next on May 6, according to the media forecast of 47
economists in a Bloomberg News poll.
With the war in Iraq now won, Bush has turned his focus to
the economy, which has shed 2 million jobs since he took office.
Some analysts say weak growth is threatening his re-election
hopes. Administration officials have been touring the nation this week, promoting tax cut proposal, which has run into opposition on Capitol Hill.
U.S. Treasury Secretary John Snow said earlier today that
another term for the Fed chairman would add “to the stability of
our financial situation.”
Greenspan’s service to five presidents started in 1974 when
he was chairman of the Council of Economic Advisers for Gerald
Ford. Ronald Reagan appointed him Fed chairman in 1987. In 1993 he
helped persuade President Bill Clinton to focus on reducing the
budget deficit, which had swollen to a then-record $290.4 billion
in 1992. Clinton had campaigned on increased government spending
to help the economy recover.
Greenspan has had a strained relationship with Bush’s family.
Bush’s father, George H. W. Bush, has said he would have been re-
elected president in 1992 if Greenspan had cut interest rates more
aggressively to pull the economy out of recession. “I reappointed
(Greenspan) and he disappointed me,” the elder Bush said in a
1998 television interview.
Bloomberg News
