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White House casts wider net for next Fed chief

The White House is not wedded to the candidates most often cited as potential successors to Federal Reserve Chairman Alan Greenspan and wants to cast a wider net, sources close to the Bush administration said Thursday.
/ Source: Reuters

The White House is not wedded to the candidates most often cited as potential successors to Federal Reserve Chairman Alan Greenspan and wants to cast a wider net, sources close to the Bush administration said Thursday.

"It's a very loose stage of gathering names and trying to think broadly about everyone who could conceivably be possible," one source said. "There is no list, per se."

Greenspan, who has led the U.S. central bank since August 1987, is due to step down at the end of January when his term at the Fed board expires.

While a handful of names have been discussed publicly, the process of choosing a successor is still said to be wide open.

"This administration has a knack for surprising people with names the media hasn't talked about," said one administration official, who spoke on condition of anonymity.

For most of the year, speculation on his potential heir has focused on three individuals: Glenn Hubbard, a past adviser to President Bush; Harvard economist Martin Feldstein; and Fed Governor-turned-White House adviser Ben Bernanke.

Sources said another former Bush adviser, Lawrence Lindsey, also has a shot.

"Lindsey has as good a chance as the other candidates," one source said. "He certainly brings to the table the right mix of skills and experiences. He was a former Fed governor, is a macroeconomist, has contacts in financial markets, and shares the president's philosophy on economic policy."

But Lindsey's turbulent tenure at the White House National Economic Council -- he was forced out in December 2002 -- leads some people close to the administration to question whether Bush would tap him to step in when Greenspan steps down.

"In some ways, his strength is his weakness," one source said. "He can articulate a forceful view and I think there is a view among the decision-makers that that's important ... On the other hand you do want rhetorical discretion."

The "decision-makers" in this case will be a select group of the president's closest advisers. Vice President Dick Cheney, White House Chief of Staff Andrew Card and National Economic Council Director Allan Hubbard are expected to take the lead, with Bush political adviser Karl Rove and White House budget chief Joshua Bolten also weighing in.

Greenspan, who is close to Cheney, is also expected to have input into the process.

Horse race
Some sources close to the White House have thought Glenn Hubbard, now dean of the Graduate School of Business at Columbia University, might have an inside track due to his successful stint heading Bush's Council of Economic Advisers.

Some think, however, Hubbard could end up taking the reins at the U.S. Treasury instead, if and when current Treasury Secretary John Snow moves on. Few people expect Snow to stay on for the duration of Bush's second term.

Hubbard's public finance expertise could prove valuable at the Treasury at a time the administration is pushing for an overhaul of the U.S. tax code.

Lindsey, who has maintained regular contact with the administration, shares Hubbard's knowledge of public finance and is a darling of conservative supply-side economists. But his stint as a Fed board member in the 1990s gives him a grounding in monetary policy that Hubbard lacks.

Some sources believe, however, a less-than-stellar stint at the White House limits Lindsey's chances to return to the Fed.

The economic team in the first two years was marked by infighting, some of which spilled out in public, and Lindsey received a share of the blame.

"He was at the NEC in a coordinating role and he was unable or unwilling to coordinate," one source said. "He would advocate his own position."

At online futures market, the odds put on Lindsey succeeding Greenspan soared to 30 percent last week. They have since subsided, but the market still thinks he has has a better shot than Hubbard, although not as good as favorite Bernanke or second-runner Feldstein.

The administration also needs to shore up the seven-member Fed board ahead of Greenspan's departure. Bernanke's seat is still vacant and another will open up at the end of August, when Fed Governor Edward Gramlich leaves.

The rumor mill has been churning about contenders for those positions as well. Among the names that have surfaced are former Bush adviser Randall Kroszner, former Treasury official Richard Clarida and economist and author Todd Buchholz, who advised during Bush's 2004 presidential campaign.

Some people close to the administration had said they thought Clarida's chances at winning a seat had dimmed. However, one source said Thursday Clarida was still in the running.