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Bush takes his time to renominate Fed chief

With fewer than six weeks left in Alan Greenspan's term at the helm of the Federal Reserve, some analysts are wondering why President Bush has not yet renominated the central banker.
President Bush is widely expected to tap Alan Greenspan for a fifth term as chairman of the Federal Reserve.J. Scott Applewhite / AP file
/ Source: Reuters

With fewer than six weeks left in Alan Greenspan's term at the helm of the U.S. Federal Reserve, some analysts are wondering why President Bush has not yet renominated the 78-year-old central banker.

Fed watchers by and large expect Bush will very soon tap Greenspan for a fifth, and what would be final, four-year stint as Fed chairman, but some can't fully banish the thought that the delay might be a sign of trouble brewing.

"Funny things can happen in an election year," said Lou Crandall, chief economist at Wrightson ICAP in New York.

Greenspan's term as Fed chief is set to expire on June 20 and, while he would stay in place as acting chair even if it did run out, Wall Street has noticed the clock ticking.

"The longer the White House waits to reappoint him, the more it will invite speculation that the appointment is being held up to lean on him over hiking rates so close to the election," ISI Group said in a note to clients on Monday, adding it does not believe that is the case.

White House officials insist the president has no interest in naming anyone but Greenspan. When pressed Tuesday, spokeswoman Erin Healy cited Bush's public backing of the Fed chief a little more than a year ago.

"I think Alan Greenspan should get another term," Bush told reporters in April last year. The following day, Greenspan issued a statement saying he would accept. "If President Bush nominates me, and the Senate confirms his choice, I would have every intention of serving," he said.

Democrats and Republicans alike say Greenspan's nomination would sail smoothly through the Senate, which must approve the White House choice.

"I think he'll be approved overwhelmingly," said Senate Finance Committee Chairman Charles Grassley, a Republican from Iowa. "The president said a year ago he's going to send his name up and I assume he will."

“Mechanical” difficulties
The leader of the world's most powerful country and the head of the world's mightiest central bank have had their differences.

Early last year, the Fed chief told Congress the U.S. economy did not need the stimulus another Bush tax cut would provide, leading to speculation Bush would let Greenspan go.

In addition, Greenspan regularly warns of the economic dangers posed by budget deficits at a time the administration is facing criticism over record flows of government red ink.

But administration officials have praised the aggressive efforts the Greenspan-led Fed made to combat the 2001 recession and lingering economic malaise -- a string of 13 interest-rate cuts now starting to pay economic dividends.

"I would be utterly astonished if this didn't turn out to be purely mechanical," former Fed governor Lyle Gramley said.

A spokesman for the Senate Banking Committee, which would consider the nomination before sending it to the full Senate for approval, said the panel would likely move quickly.

"I think that we could do it in a week or two," panel spokesman Andrew Gray said.

When the Senate considered Greenspan's chairmanship four years ago, the nomination was approved in under two weeks. However, in that instance it was sent to the Senate five months before the prior term expired.

Even if Greenspan's expected nomination is not approved by June 20, he would almost certainty continue to serve in his post as acting chairman.

He did just that for nearly four months in 1996 when Democratic Sen. Tom Harkin of Iowa delayed his nomination.

Gramley said it is hard to imagine a repeat of the 1996 episode. "Given all the other problems our nation faces now, I would think any senator would be rather foolish to inject another bit of uncertainty into financial markets," he said.

Even if Greenspan is approved for a fresh term at the head of the U.S. central bank, he would almost certainly be unable to serve the full four years because his separate term as a member of the Fed's board expires in January 2006 and he cannot be renominated.