WASHINGTON, May 18 (UPI) -- It came as no surprise Tuesday that the White House announced it is nominating Alan Greenspan as chairman of the Federal Reserve for the fifth consecutive term.
President Bush made clear as early as last year that he would want the 78-year-old to be reappointed to the post, and Greenspan himself issued a public statement that should he be asked to serve another term, he would accept.
While his nomination will have to be confirmed by the Senate, it is unlikely that he will face much opposition from either the Democrats or the Republicans. For while he is no longer as revered as he once was at the height of the bubble economy in the late 1990s, when the U.S. economy seemed to know no bounds, most policymakers and investors alike remain confident in Greenspan's ability. Or perhaps it is better to say that many fear that replacing him would rattle the global financial markets. After all, Sen. John McCain (R-Ariz.) expressed the sentiments of many when he declared that he would like to keep him on, no matter what.
"If he were to happen to die, God forbid, I would do like they did in the movie 'Weekend at Bernie's'. I would prop him up and put a pair of dark glasses on him," McCain said on the campaign trail in his bid for the presidency in 2000, emphasizing that the mere presence of Greenspan boosts investor confidence and spurs economic growth.
In announcing the nomination Tuesday for his fifth term in office, Bush too echoed the same thoughts as he stated that "Alan Greenspan has done a superb job as chairman...and I have great continuing confidence in his stewardship."
Certainly, the Bush administration has benefited from the Fed's monetary policy, as the central bank slashed interest rates to their lowest level in over four decades, with the federal funds target rate at 1.00 percent, in order to keep the cost of money low and the economic engine humming. Indeed, some economists argue that the single biggest factor keeping the U.S. economy from falling flat after the burst of the stock market in 2000 and the terrorist attacks in 2001 was record low interest rates, thanks to Greenspan.
But at the same time, Fed watchers are already trying to gauge who his successor may be.
For one, Greenspan is unlikely to be able to serve out his latest full four-year term, which will last until June 2008. For the chairman must be a member of the Federal Reserve Board of Governors to serve, and his seat on the board expires in January 2006. The 14-year term as a board member, moreover, cannot be extended, nor can an individual serve for more than one term. Granted, it is possible that this particular regulation may change to accommodate Greenspan, but many analysts argue that that is unlikely. If that is indeed the case, then a new Fed chairman must be appointed by the beginning of 2006.
Another reason Wall Street is anxious to figure out who would succeed Greenspan is that the chairman is getting old and could be challenged physically to serve out his term. To be sure, he remains sprightly and is a fixture on Washington's social scene together with his wife, television reporter Andrea Mitchell.
Yet at the same time, Greenspan was treated for prostate cancer last year, and he has cut back on his travels in recent years, both within and outside the United States. For instance, he gives more speeches via satellite television rather than by making a personal appearance. He also certainly does not need the paycheck from the Fed, as he is already fairly well off financially, having owned his own financial advisory company until assuming his role at the helm of the Fed. Moreover, payment he could receive from advisory roles in the private sector would be far greater, and require much less responsibility and stress.
Whoever his successor may be, it is clear that he or she will have incredibly big shoes and an even bigger reputation to follow. The nomination of his successor will also be a key economic decision for whoever wins the presidential elections in November.