Clinton's Fed Picks Hard To Peg

Experts Don't Know What To Expect From Ferguson, Gramlich

April 22, 1997|By Jay Hancock | Jay Hancock,SUN STAFF

Roger Ferguson, one of President Clinton's tentative nominees for the Federal Reserve Board, is a banking consultant who went to Harvard with a top Treasury official. The other, Edward M. Gramlich, is a seasoned economist who once ran the Congressional Budget Office.

Each is qualified and respected, but neither man has deposited much evidence to help monetary experts divine how he might try to influence Fed policy.

Gramlich seems to be the kind of mild monetary liberal who might take more risks with inflation, analysts said yesterday. Ferguson, whose background is in private business, is even more of an unknown.

"On paper, they have interesting credentials, relevant credentials," said Kenneth Mayland, chief economist at KeyCorp, a banking company based in Cleveland. "But on the question, would they raise interest rates?, it's a crapshoot. These guys aren't macro-economists with well known views and prejudices."

Two vacancies on the Fed's seven-person board of governors await Clinton's appointments and Senate approval.

White House sources confirmed yesterday that the president's nominees are Ferguson, a partner with consultancy McKinsey & Co., and Gramlich, dean of the School of Public Policy at the University of Michigan. Their formal nominations await successful background checks.

Ferguson is an expert in banking technology and payment systems for McKinsey, a large, prestigious firm that sells advice to all kinds of businesses.

Gramlich is an authority on public finance, "a numbers guy" who "believes in government intervention in the conventional sense," said Gary Robbins, president of Fiscal Associates, an Arlington, Va., consulting and research firm. As chairman of the Advisory Council on Social Security, Gramlich recently recommended boosting payroll taxes to help fix the pension system.

"Gramlich is a well-known commodity in the nation's capital, given his work on Social Security," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America. "But what his views on monetary policy are, I don't think anybody knows. Ferguson -- I can't find anybody who knows anything about him."

Both Gramlich and Ferguson contrast with, say, Alan Blinder. Blinder is a vocal inflation "dove" whose appointment as Fed vice chairman three years ago prompted speculation that the nation's central bank would lean toward a looser money supply and perhaps slightly higher inflation.

Blinder, who has since left the Fed to return to teaching at Princeton University, was overshadowed by Alan Greenspan, the Fed chairman and advocate of a short inflation leash. Greenspan was recently reappointed by Clinton, and he's expected to maintain strong sway over present and future Fed governors.

Ferguson reached the White House's attention through Lawrence Summers, deputy treasury secretary, who attended Harvard with him. Although Ferguson has consulted for banks, "the banking industry probably would have preferred a banker with real, line experience in banking" said Sung Won Sohn, chief economist for Norwest Corp., a Minneapolis banking company.

Ferguson would be the third African-American Fed governor, a Fed spokesman said. The others were Andrew F. Brimmer, from 1966 to 1974, and Emmett J. Rice, from 1979 to 1986, a Fed spokesman said.

Gramlich, who once worked for the Fed's research division, bears credentials similar to those of Alice M. Rivlin, appointed by Clinton to replace Blinder as Fed vice chairman. Both came out of the Brookings Institution. Both once ran the Congressional Budget Office, Gramlich as acting director.

"He is as close a candidate clone to her as you could find," said James Annable, chief economist for First Chicago NBD. "They're both fiscal policy experts. They're both very good economists and both experts in social-welfare economics."

That welfare background means Gramlich might favor letting the unemployment rate fall relatively lower -- even if it means risking higher inflation, Annable said.

But the argument wouldn't be a new one inside the Fed. Neither of the departing governors -- Janet Yellen and Lawrence Lindsey -- have been known as aggressive inflation hawks, Annable said. And Rivlin is also perceived as less inclined to fight inflation by raising interest rates.

Pub Date: 4/22/97

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