WASHINGTON, Oct. 24 (UPI) -- After years of speculating who could possibly replace the seemingly irreplaceable Alan Greenspan, the guessing game finally came to an end Monday as the White House officially announced that it picked Ben Bernanke to succeed him as the head of the Federal Reserve Board.
Speculation that Bernanke might succeed Greenspan had been circulating for a while, and indeed, some Fed watchers had suggested that since he was appointed Fed governor in 2002, he was being groomed for the top spot. For some time, it has been clear that the 79-year-old Greenspan would not seek another term as chairman once his current term expires on Jan. 30, having been with the Fed since 1987, and guessing who might succeed him had become a parlor game for many economic policy experts over the past few years. For some time, though, Bernanke's name had been on the list of many, and expectations of him getting the top spot at the Fed grew further following his appointment as chairman of the White House's Council of Economic Advisors this summer. That brought the Harvard- and MIT-trained economist closer to President Bush's inner circle.
In announcing Bernanke's choice to head the Fed at the White House with both Greenspan and Bernanke by his side, Bush said that the CEA chief was "the right man to build on the record Alan Greenspan has established." Meanwhile Greenspan himself stated that Bernanke "comes with superb academic credentials and important insights into the ways our economy functions. I have no doubt that he will be a credit to the nation as chairman."
There is no doubt that investors and legislators on both sides of the political aisle were content with Bush's pick, unlike some of the president's other high-ranking and politically sensitive appointments in recent months.
Certainly, financial markets welcomed the news as the Dow Jones industrial average climbed up over 115 points in late afternoon trading Monday.
The announcement was well received on Capitol Hill too, with the head of the Congressional joint economic committee Jim Saxton, R-NJ, stating that "he has an excellent academic track record as a macroeconomist, and as a pre-eminent supporter of inflation targets as a framework for price stability," adding that "I believe Dr. Bernanke will be an able successor to Chairman Greenspan." Of course, given that his confirmation to the post depends on Senate approval, Bernanke's good standing with members of Congress is critical to his appointment.
Likewise, those in the manufacturing sector welcomed the announcement, with the head of the Manufacturers' Alliance Thomas Duesterberg stating that Bernanke "Has a broad and incisive grasp of the policy levers needed to keep the American economy strong. Importantly, especially since arriving in Washington, he has also made a systematic effort to understand the perspective of business and the impact of policy on business."
Nevertheless, Greenspan will be a hard act to follow for any economist, as he has been regarded not only as one of the sharpest economic minds around, but also a master of handling politics and could be effective under both Republican and Democratic rule. Furthermore, the post of Fed chairman is not only one of the most important positions in directing the U.S. economy, but the global economy as well.
Still, many analysts expect Bernanke to be able to handle the responsibility of having power well beyond the U.S. borders more than adequately.
Bernanke "is a specialist well-known in economic circles" both within and outside the United States, said HVB America's senior economic advisor Roger Kubarych, adding that particularly following his appointment as Fed governor three years ago, his papers have been closely read by economists both within and outside the United States, and enjoys close ties with economists at the European Central Bank.
One clear disadvantage Bernanke has compared to Greenspan is his lack of private sector experience. Prior to his appointment to the Fed, Greenspan not only had experience as a White House economic adviser, but had spent years running his own highly successful private investment company. In contrast, Bernanke's background has focused very much on pure economic research, having been an economics professor at Princeton University since 1985 before becoming a Fed governor.
But while the challenges of keeping inflation under control and the economy expanding at a steady clip will require more emphasis on economic principles than on private sector experience, according to many analysts.
Moreover, "everyone in the private (banking sector) will want to talk to the Fed chairman...so he'll never lack for advice from them," HVB's Kubarych said.
