President Bush renominated Alan Greenspan as chairman of the Federal Reserve on Tuesday, praising his leadership and sending a strong signal of stability to financial markets.
The nomination was announced as Greenspan met at the White House with the president.
“Sound fiscal and monetary policies have helped unleash the potential of American workers and entrepreneurs, and America’s economy is now growing at the fastest rate in two decades,” Bush said in a statement.
“Alan Greenspan has done a superb job as chairman of the Board of Governors of the Federal Reserve System, and I have great continuing confidence in his economic stewardship,” the president said.
Bush had announced in April, 2003, that he would keep Greenspan, 78, for a fifth term.
In a brief statement released by the Fed, Greenspan said, “I am honored to be nominated by President Bush and, if confirmed by the Senate, to continue my service as chairman of the board of governors of the Federal Reserve System.”
Financial markets took the announcement in stride given that Bush had announced a year ago his intention to nominate Greenspan for another term.
His confirmation is expected to win easy Senate approval. But some analysts predicted that Democrats would use the upcoming debate to highlight areas where they say Bush has failed in handling the economy, especially in light of the fact that the central bank is expected to start raising interest rates possibly as soon as June 30 to make sure inflation pressures stay contained.
“Democrats will take the opportunity to criticize the administration and say that the prospect of the Fed raising rates is just one more problem for the economy to endure,” said economist David Jones, author of four books on the Greenspan Fed.
Greenspan’s current term as chairman does not end until June 20, 2004, meaning that if Bush had waited to make his choice, the matter could have become embroiled in the presidential election campaign.
“The president thinks Alan Greenspan is doing a great job and that’s why he believes he should be renominated,” White House press secretary Scott McClellan said. “Obviously there are term limits on the position. But the president wants him to continue to serve as long as possible.”
Greenspan was chairman of the Council of Economic Advisers under President Gerald Ford from 1974 to 1977 and was tapped to be Fed chairman by Ronald Reagan in 1987. He was renominated by Bush’s father and twice by Bill Clinton.
Bush said he was renominating Greenspan as Fed chairman for a term not to exceed four years — which would expire in June 2008.
Greenspan would have to deal with a complicating factor were he to serve a full chairman’s term — his current term as a member of the seven-member Fed board expires in January 2006.
Under law, a board member who has completed a full 14-year term, as Greenspan will have done, cannot be reappointed for another Fed term. However, a Fed board member can continue to serve once his term has ended until the president nominates and the Senate confirms a successor.
That would mean Greenspan could continue to serve on the board and complete another full term as chairman if the president at that time wished him to do so.
Greenspan took over as Fed chairman in August 1987, succeeding Paul Volcker.
He has been Fed chairman for 17 years, longer than any chairman at the central bank except for the legendary William McChesney Martin, who was first nominated for the Fed by Harry Truman and served into the start of the Nixon administration.
McClellan refused to answer questions about whether Greenspan would step down when his board term ends in early 2006, saying that Bush wants him to stay at the Fed for as long as possible.