Ben Bernanke, chief economic adviser to United States President George Bush, was named on Monday to succeed Alan Greenspan as chairperson of the Federal Reserve in Washington.
The appointment of Bernanke (51), to what is seen as the world’s most powerful banking job, had been widely anticipated. He is regarded as a highly qualified and safe pair of hands — a sound choice at a time when the White House is under fire not least for Bush’s controversial nomination for the Supreme Court, Harriet Miers.
Greenspan (79), who took over as chairperson in 1987, is due to step down at the end of January.
”The most important thing is that there is no shock value here,” said Chris Low, chief economist at FTN Financial in New York. ”He is well respected, the market wanted him — he was somewhat anticipated.”
Wall Street reacted positively to the nomination. The Dow Jones Industrial Average, the blue-chip index, jumped about 60 points as Bernanke’s name leaked out, and was trading up 110 points — at 10 325 — at midday.
The Fed chairperson is the most important economic job in Bush’s gift. The Fed is the US central bank — an independent body in charge of monetary policy, setting interest rates and overseeing the integrity of the banking system. Comments from the chairperson can move markets worldwide.
Richard Shelby, chairperson of the Senate banking committee who will lead the hearing empowered to confirm the appointment, seemed to suggest that there would be few hurdles. He described the nomination as a ”good appointment” and said he hoped to hold the confirmation hearing ”as soon as possible”.
Flanked by Greenspan and Bernanke, Bush said at the White House that Bernanke had ”deep respect in the financial community” and was ”the right man to build on the record Alan Greenspan has established”.
Bernanke is unlikely to take the Fed in a sharply different direction to Greenspan. He said that, if confirmed, ”my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years”. One welcome difference noted by economists was that he speaks in plainer English than the outgoing chairperson’s notorious obfuscations.
The other two contenders named as possible candidates had been the economists Martin Feldstein, of Harvard University, and Glenn Hubbard, of Columbia University.
Observers in Washington has said it was imperative for the Bush administration to make an appointment that would be well-received, and to do so quickly to restore some credibility to a White House roiled by controversies, including possible connections to the leak of a CIA agent’s name, its response to Hurricane Katrina and the nomination of Miers.
”Bernanke carries a lot of credibility in the marketplace,” said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. ”He’s well respected in terms of his knowledge and his experience at the Fed. He is seen as a very capable and credible candidate that would prove reassuring in the near term.”
Greenspan had a formidable reputation. Bush described him on Monday as a legend.
He was nominated by President Ronald Reagan and became the longest-serving Fed chairperson in history. He steered the US through two recessions — in the early 1990s and in 2001, financial meltdowns in Asia and Latin America, terrorist attacks and an unprecedented wave of corporate scandals.
During the long expansion between the two recessions, he coined perhaps his most famous phrase when he accused the dotcom markets of suffering from ”irrational exuberance”.
Greenspan was awarded an honorary knighthood in 2002. He has also been decorated with France’s Legion of Honour.
Economists around the world have become used to wading through his addresses to get a hint of likely market movements. He has in recent years helped to shape the debates surrounding social security in the US, tax cuts and federal debts. He clashed with Bush over the size of the federal deficit and the wisdom of further tax cuts. Bernanke is also a deficit hawk.
After taking interest rates to a historic low, the Fed monetary policy committee has increased them by a quarter percentage point at the past 11 meetings. — Guardian Unlimited Â