Bernanke to Succeed Greenspan As Fed Chief

Associated Press

 

Monday October 24, 6:45 pm ET

By Jeannine Aversa, AP Economics Writer

 

 

Bush Picks Former Economics Professor Bernanke to Succeed Greenspan As Federal Reserve Chairman

WASHINGTON (AP) -- Ben Bernanke, a plain-speaking former economics professor, was chosen Monday by President Bush to be the next chairman of the Federal Reserve, the most influential economic policy job in the world.

 

If approved by the Senate, Bernanke would succeed Alan Greenspan, who has spent 18 years at the helm and is expected to step down Jan. 31. Bush called Greenspan a "legend," and Bernanke promised to continue the chairman's policies.

 

"Ben has done path-breaking work in the field of monetary policy, taught advanced economics at some of our top universities and served with distinction on the Fed's Board of Governors," said Bush, who was flanked by Bernanke and Greenspan during a brief White House ceremony. "He's earned a reputation for intellectual rigor and integrity. He commands deep respect in the global financial community."

 

Greenspan called Bush's choice "a distinguished appointment. Ben comes with superb academic credentials and important insights into the ways our economy functions."

 

It was the third time in as many years that Bush has turned to the 51-year-old Bernanke for a sensitive economic post. The president named him to the Fed board in 2002, then made him chairman of the president's Council of Economic Advisers earlier this year.

 

The nomination comes at a difficult time for Bush. His approval ratings are sagging, his choice of Harriet Miers for the Supreme Court is under attack, and his top political adviser -- Karl Rove -- is a central figure in the investigation of who leaked the name of an undercover CIA officer.

 

The initial reaction to Bernanke was positive. Academics, Republican and Democratic lawmakers, economists and other experts said Bernanke, a leading thinker on monetary policy, has impeccable academic credentials for the Fed post.

 

On Wall Street, the Dow Jones industrial average soared nearly 170 points, the best one-day showing in six months.

 

Bernanke (pronounced ber-NANK-ee) acknowledged that he has big shows to fill, saying Greenspan "has set the standard for excellence in economic policy-making."

 

If he is approved to a four-year term as Fed chairman, Bernanke said, his first priority would be "to maintain continuity" with the policies and strategies during the Greenspan era. He pledged to do all he could to ensure "the continued prosperity and stability of the American economy."

 

The Fed determines interest rate policies that affect any person or business that borrows money. Its decisions -- along with utterances from the Fed chief -- can influence financial markets around the globe.

 

As the country's second-longest serving Fed chairman, the 79-year-old Greenspan has attained cult-like status and often is refereed to as the second-most important person in Washington. On Greenspan's watch, the U.S. economy grew from March 1991 to March 2001, the longest continuous expansion in history. The two recessions during his tenure -- in 1990-91 and in 2001 -- were mild.

 

While Bernanke pledged continuity with his predecessor's policies, the two men differ on whether the Fed should set targets for inflation -- Bernanke thinks it should, Greenspan does not. Otherwise, they share a similar philosophy, so much so that while the younger man was at the Fed, market observers often looked at his speeches for insight into Greenspan's thinking.

 

A summa cum laude graduate of Harvard University in 1975, Bernanke received his doctorate from the Massachusetts Institute of Technology in 1979. He was professor of economics at Princeton University and then chairman of the economics department until 2002, when Bush named him to the Federal Reserve Board. He also has taught at Stanford University.

 

Bush said Bernanke "is the right man to build on the record Alan Greenspan has established." Marc Lackritz, president of the Securities Industry Association, said Bernanke's service at the Fed under Greenspan "has provided him invaluable preparation for this critical role, and his steady hand and solid judgment should serve our financial markets well."

 

Some economists wondered whether Bernanke's lack of hands-on business or Wall Street experience and limited policy-making experience in Washington could be a drawback.

 

With rising inflation, an uncertain employment climate, bloated budget and trade deficits, and a housing market surge that appears to be nearing an end, there are many issues confronting the next Fed chairman.

 

Some Democrats question whether Bernanke would do enough to use the Fed's bully pulpit to get Congress and the administration to rein in bloated budget deficits, which over time could pose a danger to the economy if they push long-term interest rates up. And, they hope Bernanke will be truly independent from the Bush administration. That's crucially important for a Fed chairman to earn credibility with Wall Street and central bankers from around the world.

 

Democrats also seized on Bernanke's statements indicating support for extending Bush's tax cuts.  Sen. Chuck Schumer, D-N.Y., called that "very troubling" while Senate Minority Leader Harry Reid, D-Nev., said it "will be important that Mr. Bernanke demonstrate that he is committed to guiding the economy to produce results for all Americans rather than promoting partisan policies that benefit special interests and an elite few."

 

Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, which will consider the nomination, struck a positive note: "I am confident that this nominee will be thoroughly questioned but also well-received by all members of our committee."

 

Sen. Paul Sarbanes, the top-ranking Democrat on the committee, said Bernanke has "first-rate academic qualifications, but we need to have a thorough hearing on him to explore a number of issues, including his ability to render independent judgments."

 

The only senator to say he would vote against the nomination was a Republican -- Kentucky's Jim Bunning, a frequent Greenspan critic. He said Bernanke did not show enough independence while on the Fed.

 

A date for a nomination hearing hasn't been set. But Shelby indicated it's possible a hearing could take place before Thanksgiving; he hoped the confirmation process could be completed before Congress adjourns for the year -- possibly in late November or in December.

 

Bernanke has won Senate confirmation three times in the past: twice at the Fed and once to be chairman of the CEA. If all goes smoothly, Bernanke could take over on Feb. 1. His first Fed meeting would be March 28.

 

Federal Reserve: http://www.federalreserve.gov/

White House: http://www.whitehouse.gov/

CEA: http://www.whitehouse.gov/cea/

 

 

By The Associated Press Mon Oct 24, 1:30 PM ET

President George W. Bush's remarks in the nomination of Ben Bernanke to the role of chairman of the Federal Reserve, as transcribed by CQ Transcriptions.

 

BUSH: Good afternoon.

 

One of a president's most important appointments is chairman of the Federal Reserve. In our economy, the Fed is the independent body responsible for setting monetary policy, for overseeing the integrity of our banking system, for containing the risk that can arise in financial markets, and for ensuring a functioning payment system.

 

Across the world, the Fed is the symbol of the integrity and the reliability of our financial system. And the decisions of the Fed affect the lives and livelihoods of all Americans.

 

To lead this institution, a chairman must be a person of impeccable credentials, sound policy judgment, and character.  Today, I am honored to announce that I am nominating Ben Bernanke to be the next chairman of the Federal Reserve. Over the course of a career marked by great accomplishment, Ben has done path-breaking work in the field of monetary policy, taught advanced economics at some of our top universities, and served with distinction on the Fed's Board of Governors.  He's earned a reputation for intellectual rigor and integrity. He commands deep respect in the global financial community. And he will be an outstanding chairman of the Federal Reserve. 

 

Ben will replace a legend, Alan Greenspan, who will retire when his current term runs out at the end of January.  For nearly two decades, Chairman Greenspan has shepherded our economy through its highs and its lows. Under his steady chairmanship, the United States economy has come through a stock market crash, financial crises, from Mexico to Asia, two recessions, corporate scandals, and shocks ranging from devastating natural disasters to a terrorist attack in the heart of America's financial center.  Through all these challenges, Chairman Greenspan's prudent judgment and wise policies have kept inflation low. He has played a major role in America's strong economic growth. He has dominated his age like no central banker in history. He has contributed a better life for all Americans. And I thank him for his service.

 

Ben Bernanke is the right man to build on the record Alan Greenspan has established.  Ben graduated from Harvard with top honors, earned a doctorate in economics from Massachusetts Institute of Technology. He's built a record of excellence as both an academic and policy-maker. He's the author of several scholarly books and is one of the most cited economists in the world.  As Fed governor, Ben advocated greater transparency in communication with the public and markets. His speeches were widely admired for their keen insight and clear simple language.  Ben's career has also been distinguished by leadership. He was chairman of Princeton's Economics Department, founding director of Princeton's Bendheim Center for Finance, and a founding editor of the International Journal of Central Banking.  Since June he has served as chairman of the Council of Economic Advisers. Ben is also a kind and decent man who is held in high regard by all those who have worked with him. He has the support of a strong and loving family.

 

I'm pleased to see that Ben's wife, Anna, and his two children, Alyssa and Joel, are with us today. I want to thank Ben for his willingness to serve in a position so important for world markets and so vital to the well-being of the American people.  I urge the Senate to act promptly to confirm Ben Bernanke as the 14th chairman of the Federal Reserve.

 

Ben, thanks for serving.

___

BERNANKE: Thank you.

 

I'd like to express my deep appreciation to President Bush for the trust he has shown in me in asking me to lead the Federal Reserve system. If I am confirmed by the Senate, I will do everything in my power, in collaboration with my Fed colleagues, to help to ensure the continued prosperity and stability of the American economy.

 

In light of the announcement the president has just made, it's especially gratifying to have Chairman Greenspan here. In more than 18 years at the helm of the Federal Reserve, Alan Greenspan has set the standard for excellence in economic policy-making.

 

I'm personally grateful for Chairman Greenspan for his collegiality and support during my time as a member of the Fed's Board of Governors.

 

Our understanding of the best practice in monetary policy evolved during Alan Greenspan's tenure at the Fed and it will continue to evolve in the future. However, if I'm confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years.  Finally, I would like to thank my wife, Anna, my daughter, Alyssa, and my son, Joel, for their love and support. I could not contemplate undertaking these new challenges without their help.

 

Thank you very much.

 

BUSH: Congratulations, Chairman.

 

BERNANKE: Thank you.

 

BUSH: Mr. Chairman, thank you for being here. Appreciate you.

 

Thank you all.

END