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updated 12/16/2004 7:57:31 AM ET 2004-12-16T12:57:31

Senior Republicans sounded out Alan Greenspan, chairman of the Federal Reserve, about taking over from John Snow as U.S. Treasury secretary, the Financial Times has learned.

The informal approach, which would have put the most respected economic leader in the U.S. in charge of President George W. Bush's ambitious second-term domestic agenda, was declined.

The administration's plans to overhaul Social Security and reform the tax system face a stern challenge on Capitol Hill and skepticism in some quarters on Wall Street.

The approach to Mr. Greenspan made at arm's length from the White House reflected concern that Mr. Snow was not the most effective champion of Mr. Bush's agenda.

In a separate effort to strengthen its economic team by bringing in a Fed policymaker, Ben Bernanke, an influential Fed governor, is the leading candidate to replace Greg Mankiw as chairman of the White House Economic Advisers.

The White House yesterday refused to comment on what it called "speculation" regarding Mr. Greenspan.

Mr. Bush last week confirmed that Mr. Snow would remain as Treasury secretary, ending days of reports that the administration had been trying to line up a big-name replacement.

"The president thinks Secretary Snow has been an outstanding member of his economic team," Claire Buchan, White House spokeswoman, said.

Michelle Smith, Federal Reserve spokeswoman, said she had no comment.

A group of influential conservatives lobbied the administration and Mr. Greenspan directly, arguing for him to replace Mr. Snow, people familiar with the talks said.

Mr. Greenspan, whose term as Fed chairman comes to an end next year, is a Republican but commands a unique position of public trust and esteem.

He was chairman of the National Commission on Social Security Reform, from 1981-83, which recommended increasing the payroll tax to create the Social Security trust fund and a gradual increase in the retirement age.

Mr. Bernanke, whose candidacy is supported by a number of economists in, and close to, the administration, has shown himself to be an effective communicator on complicated economic subjects. He has not been formally asked if he would take the job but has been sounded out by administration officials. Mr. Mankiw, current CEA chair, is expected to return to his academic position at Harvard early next year.

Mr. Bernanke has demonstrated well-developed political skills, raising new ideas at the Fed without raising the ire of Mr. Greenspan, who in the past has clashed with free-thinking governors. He is also seen as a potential replacement when Mr. Greenspan steps down as Fed chairman, along with Martin Feldstein and Glenn Hubbard, both academic economists and former CEA chairs.

Copyright The Financial Times Ltd. All rights reserved.

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