November 1, 2004
CNN MONEY
WASHINGTON (Reuters) - It scarcely rated a mention on the campaign trail, but choosing a successor to Federal Reserve chief Alan Greenspan may be the biggest economic choice that Tuesday's U.S. presidential election victor will face.
The 78-year-old Greenspan, chairman of the Fed since 1987, is set to step down when his term on the central bank's board expires on Jan. 31, 2006.
While that is 15 months off, whoever takes over at the White House will want to move fast to minimize financial market jitters.
Several names are already in the frame as possible picks -- former Treasury chiefs Robert Rubin or Lawrence Summers, if Democrat Sen. John Kerry wins; and Glenn Hubbard or Martin Feldstein, former chairmen of the White House Council of Economic Advisers, if President George W. Bush returns.
None of them has publicly said he wants the job, and some observers doubt that Rubin, for one, would give up his high-powered position as a director of Citigroup in New York City.
Fed watchers are also divided on whether Wall Street credibility, or technical skill as a monetary-policy practitioner, is most crucial in a Greenspan replacement. But all deem the current chairman, amply endowed with both, a hard act to follow.
"Greenspan has advanced the sophistication of the post significantly, enhanced transparency and refined the communications side of Fed policy to a fine art," said David Jones of DMJ Advisors in Colorado Springs, Colo.
Rubin's return?
Among Democrats, Rubin, a Kerry adviser with huge political and market clout, is the clear standout. Kerry has even said he would choose someone like Rubin for the job.
As adviser and Treasury chief under Bill Clinton, Rubin crafted policies some credit with helping lay the foundation for 120 months of economic expansion, the longest in U.S. history.
Kerry has sought to cloak himself in that success and has used Rubin to underscore his commitment to deficit reduction, a central tenet of Clinton-era policies.
Rubin associates say he would find the post tough to refuse. Still, he has not tipped his hand, and they stress how tired he was of Washington, where he spent six years living in a hotel, by the time he left in July of 1999.
If Rubin said no, Kerry could turn to Summers, Rubin's successor as Treasury chief.
While many think Summers would want the job, opinions are divided on whether he would feel it appropriate to step down as president of Harvard University after just a few years.
Stanley Fischer -- former No. 2 at the International Monetary Fund who worked closely with Rubin, Summers and Greenspan in the 1997-1998 financial crisis -- also gets mentioned, if only as a dark horse, in the Fed race.
The unique demands of the job as Greenspan has shaped it could lead the next president to take the unusual step of looking inside the Fed for an heir.
For Kerry, that may mean Clinton-appointed Vice Chairman Roger Ferguson. A lawyer and economist with bank expertise, Ferguson is rated highly by Greenspan and would be the first black chairman.
Ferguson won top marks for guiding the Fed through the turbulence following the Sept. 11 attacks, which came while Greenspan was overseas.
Other possibilities include San Francisco Fed President Janet Yellen, who headed Clinton's Council of Economic Advisers and would be the first woman in the post, and former Vice Chairman Alan Blinder, now a Princeton University professor.
Old friends
For Bush, looking inside the bank could lead him to Fed Governor Ben Bernanke. But Bernanke, while seen as a brilliant economist, might lack the political connections for the job.
Analysts guess Bush would more likely to select Hubbard, who helped craft his tax-cut plans and is now dean of Columbia University Business School.
Feldstein has also been cited. As a Harvard professor, he taught many economists -- including Hubbard -- who have gone on to big policy roles under Republicans and Democrats alike.
Some see John Taylor, the Bush Treasury's top international hand, as a possibility. But the author of the famed Taylor rule, which many central bankers use as a policy guide, is seen as perhaps too much of an academic for the role.
Another Republican-favored Fed insider had been Dallas Fed President Robert McTeer. But his decision to accept the top job at Texas A&M University System, if confirmed as expected on Nov. 4, removes him from the running.
http://money.cnn.com/2004/11/01/news/economy/election_fed.reut/index.htm