10-24-05 - President Bush named top White House economic adviser Ben Bernanke as chairman of the Federal Reserve Board on Monday in place of near-legendary Alan Greenspan as the official in closest control of interest rates.
Bernanke instantly announced his first priority would be "to maintain continuity with the policies and policy strategies under the Greenspan era."
Bush said his choice as the nation's new central banker "commands deep respect in the financial community." And he lavished praise on Greenspan, 79, calling him a legend who "has shepherded our economy through its highs and its lows."
The appointment is subject to Senate confirmation, and the president called for swift action.
Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, issued a statement saying "I am confident that this nominee will be thoroughly questioned but also well-received by all members of our committee."
Wall Street's reaction was mixed. Stocks jumped 60 points immediately after Bernanke's name leaked out but bonds and the dollar fell because of concerns that a Bernanke-led Fed might tolerate higher inflation.
It was the third time in as many years 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.
"If I am confirmed by the Senate I will do everything in my power, in collaboration with by Fed colleagues to help assure the continued prosperity and stability of the American economy," said Bernanke, who holds degrees from Harvard and the Massachusetts Institute of Technology and was chairman of Princeton's Department of Economics.
Greenspan, who became chairman in 1987, completes his current term on Jan. 31. By naming a successor more than three months in advance, Bush appeared to be trying to clear the path for a smooth transition.
Greenspan did not speak at the brief announcement ceremony, a sure sign that his power is ebbing. For two decades, it has been his voice that has mattered most in Washington and many capitals around the world when it comes to key economy matters. His pronouncements, famously opaque, are scrutinized carefully for signs of future policy direction.
He issued a statement after the announcement, praising Bush for a "distinguished appointment," and adding he has no doubt that Bernanke will "be a credit to the nation as chairman of the Federal Reserve Board."
"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," Bush said.
Bernanke has "earned a reputation for intellectual rigor and integrity," Bush said. "He commands deep respect in the global financial community. And he will be an outstanding chairman of the Federal Reserve."
Bush praised Greenspan, as well, calling him a legend. "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," he said.
Greenspan is widely viewed as the most successful central banker in history. During his more than 18 years as Fed chairman, he presided over the longest economic expansion in U.S. history from 1991 to 2001 and only had two mild recessions during his watch, in 1990-91 and 2001.
He adjusted interest rate policies to cushion the economy from two steep stock market declines in 1987 and 2000. He also worked to keep the economy on track during a string of other financial calamities including the savings and loan crisis of the late 1980s, the 1997-98 Asian financial crisis and the corporate accounting scandals of 2003.
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, he received his doctorate from the Massachusetts Institute of Technology in 1979. During his years in Boston, he focused on the economic underpinnings of the Great Depression and the losing track record of the city's beloved baseball team, the Red Sox.
"Economics is a very difficult subject," Bernanke once said. "I've compared it to trying to learn how to repair a car when the engine is running."
Senate Democratic Leader Harry Reid issued a statement signaling the type of questions Bernanke might expect at his confirmation hearings.
"I look forward to the confirmation hearings to learn more about Mr. Bernanke's views on how the Federal Reserve should steer our economy free from political influence and interference," he said.
Reid, who has been sharply critical of Greenspan for supporting Bush's tax cuts, added, "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."
Greenspan was 61 when President Ronald Reagan named him Fed chairman.
The first President Bush named him to a second term, although some Republicans later complained he had not done enough to revitalize the economy during the 1992 campaign that resulted in Bill Clinton's victory in the presidential race.
Clinton named Greenspan to two terms _ having won the Fed chairman's blessing for his first-term proposal to reduce federal deficits. So highly was Greenspan regarded that Vice President Al Gore indicated during the 2000 presidential campaign that he was prepared to offer Greenspan another term.
Bush won instead, soon reinstalled Greenspan, and won his endorsement for first-term tax cuts.
Some statements Monday on President Bush's nomination of Ben Bernanke as chairman of the Federal Reserve Board:
"Ben Bernanke is the right man to build on the record Alan Greenspan has established." Bush.
"My first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years." Bernanke.
"Ben 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 of the Federal Reserve Board." Alan Greenspan, retiring chairman of the Federal Reserve Board.
"I believe he will monitor and implement U.S. monetary policy that will ensure a strong domestic economy and maintain America's global competitiveness." Senate Republican leader Bill Frist of Tennessee.
"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." Senate Democratic leader Harry Reid of Nevada.
"I am confident that this nominee will be thoroughly questioned but also well-received by all members of our committee." Sen. Richard Shelby, R-Ala., chairman of the Banking Committee.
"We need a careful, non-ideological person who understands that the Federal Reserve's main job is to fight inflation, and Ben Bernanke seems to fit that bill." Sen. Charles Schumer, D-N.Y.
"His previous service on the Fed's board of governors under Greenspan has provided him invaluable preparation for this critical role, and his steady hand and solid judgment should serve our financial markets well." Marc Lackritz, president, Securities Industry Association
"Chairman Greenspan's success was that people had confidence in him. .... Now, the most important thing for Ben Bernanke to do is to build on that confidence and that credibility." Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee.
"We need an independent voice, free from political influence and interference, who will speak the truth to policymakers in Washington." Sen. John Kerry, D-Mass.
"Its a shame that President Bush has decided to select Dr. Ben Bernanke as chairman of the Federal Reserve. Though I believe Dr. Bernanke has the qualifications to be chairman of the Federal Reserve, I must oppose this nomination." Sen. Jim Bunning, R-Ky.