August 26, 2005
Greenspan heir must replace ‘one-man band’-Blinder
By Glenn Somerville
JACKSON HOLE, Wyo (Reuters) - One difficulty in finding an
heir to Federal Reserve Chairman Alan Greenspan is that after
18 years, many Americans equate the man with the institution, a
paper delivered at a Fed symposium on Friday said.
"He has been on the job so long, and has been so dominant
and so successful, that few Americans any longer draw a
distinction between 'Alan Greenspan' and 'the Federal
Reserve'," said the paper written by Princeton University
professors Alan Blinder and Ricardo Reis.
"U.S. monetary policy has, in a word, become intensely
personalized. It's Alan Greenspan's policy -- period," the
Blinder, a former vice chairman of the U.S. central bank,
was once viewed as a potential successor to Greenspan. The
79-year-old Greenspan, chairman of the Fed since August 1987,
is set to step down at the end of January.
The paper was intended to spark discussion at the Kansas
City Fed's annual central banking symposium, which this year
was intended to look back at the Greenspan era and to draw
lessons for future Fed leaders.
Not only has the Bush administration not yet chosen a
successor, earlier this month it said the process was only at
"a very loose stage of gathering names."
Three potentials are regularly mentioned -- Glenn Hubbard,
a past adviser to President George W. Bush; Harvard economist
Martin Feldstein; and former Fed Governor Ben Bernanke who now
is a White House adviser -- but the White House has indicated
it also may look elsewhere, possibly toward Wall Street.
This year's Fed symposium, held amid the splendor of the
Rocky Mountains, is in substantial part a salute to Greenspan
but inevitably also a discussion about who will succeed him as
prime architect of the nation's monetary policy.
Blinder and Reis say it could be "a traumatic experience"
for financial markets that trust Greenspan's stewardship but
they do not imply that is likely.
"Back in 1987, the financial markets viewed the impending
retirement of (former Fed chairman) Paul Volcker as tantamount
to the end of civilization as they knew it," the paper noted.
"But they got over it, as they will in 2006."
The paper is far from critical of Greenspan -- it says he
did "a superb job" as Fed chief -- but suggests his elliptical
style leaves a successor little from which to draw guidance and
implies a team-player approach might be preferable.
"Much of the secret to Greenspan's success remains a
secret," the authors say. "It is too bad that he has not seen
fit to share more of what he apparently knows with staff, FOMC
(Federal Open Market Committee) colleagues, economists and the
Some benefits of group decision-making, like the pooling of
knowledge, may have been foregone during Greenspan's "one-man
show." But the paper calls the standard he set during his
tenure an "exquisite success" and says the onus is on the White
House to select the right successor.
"Can President Bush pull off the trick that President
Reagan apparently did in 1987?" the paper asks, adding that it
is possible, if not easy, and making the point using a baseball
analogy -- one of Greenspan's favored sports.
"The Yankees managed to replace Joe DiMaggio in center
field by Mickey Mantle in 1951," the authors wrote. "But no
Yankee center fielder has approached that standard since."