Bush backs appointing Greenspan to 5th term

His comments are called `very strong endorsement'

April 23, 2003|By BLOOMBERG NEWS

WASHINGTON -- President Bush supports the reappointment of Alan Greenspan as chairman of the Federal Reserve when his term expires next year, the White House said yesterday.

In an interview with financial magazine reporters, Bush complimented Greenspan's performance and said: "I think Greenspan should get another term."

The Fed chairman, who underwent prostate surgery yesterday, had come under fire from administration officials for his recent criticism of Bush's tax cut package. That had raised speculation about how long the 77-year-old would run monetary policy in the world's largest economy.

White House spokesman Ari Fleischer called Bush's comments "a very strong endorsement" of the Fed chairman, although he stopped short of saying Bush had made an absolute commitment to reappoint Greenspan.

Kansas City Federal Reserve Bank President Thomas Hoenig said Monday that it would be "tremendous" if Greenspan could serve another term.

"He is an outstanding chairman," Hoenig told reporters. "He knows the data better than anyone I have ever met, but it is not just that. He is a thoughtful listener to other members of the FOMC [Federal Open Market Committee], and I think that is his real strength."

Greenspan hasn't said publicly whether he would want another term, and a Fed spokesman had no immediate comment on Bush's remarks. While Greenspan's four-year term as chairman expires in June 2004, his term on the Board of Governors doesn't expire until Jan. 31, 2006, and the White House had said it isn't searching for a successor.

First appointed 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. He has had four terms and is in his 17th year at the helm of the Fed.

If he is reappointed, the nomination is subject to Senate confirmation.

Some analysts had suggested his age and recent opposition to Bush's tax cuts might prompt his retirement.

"He's been at it for a while, and you wonder if there's time for new blood," said James Paulsen, chief investment officer for Wells Capital Management in Minneapolis. "Alternatively, perhaps he told the president he has unfinished business to attend to and the White House said OK."

Greenspan has served five presidents, starting in 1974 as chairman of the Council of Economic Advisers for Gerald Ford. President Ronald Reagan appointed him as 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.

The uninterrupted economic growth of Clinton's eight-year presidency was partly attributed to elimination of the deficit and reduction of total U.S. debt.

Greenspan's final legacy has yet to be determined. A 30 percent decline in the Dow Jones Industrial Average from its January 2000 peak heightened complaints that the central bank didn't do enough to prevent a stock bubble and market crash.

In rebuttal, Greenspan said at an economic conference in August that raising interest rates wouldn't have prevented the decline without also harming the economy. "No low-risk, low-cost, incremental monetary tightening exists that can reliably deflate a bubble," he said.

More recently, Greenspan raised questions over his future in February, when he disagreed with Bush's push for tax cuts. The Fed chairman said they weren't needed to boost the economy and would worsen the budget deficit.

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