Wed, Oct 26, 2005 page12

• Bush names Bernanke as new Fed chief

  FEDERAL RESERVE Markets welcomed the appointment, which had been widely anticipated, and at least one senator said the confirmation appears to be assured

  • THE GUARDIAN
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  Ben Bernanke, chief economic adviser to US President George W. Bush, was named on Monday to succeed Alan Greenspan as chairman of the Federal Reserve in Washington.

  The appointment of Bernanke, 51, to what is seen as the world's most powerful banking job, had been widely anticipated. He is regarded as a highly qualified and safe pair of hands -- a sound choice at a time when the White House is under fire, not least for Bush's controversial nomination for the Supreme Court, Harriet Miers.

  Greenspan, 79, who took over as chairman in 1987, is due to step down at the end of January.

  

  US President George W. Bush names his top economic adviser, Ben Bernanke, right, to become the new chairman of the Federal Reserve Board, replacing Alan Greenspan, left, in the Oval Office in Washington on Monday. The 79-year-old Greenspan is due to retire at the end of January.

  PHOTO: AP

  "The most important thing is that there is no shock value here," said Chris Low, chief economist at FTN Financial in New York. "He is well-respected, the market wanted him -- he was somewhat anticipated."

  Wall Street reacted positively to the nomination. The Dow Jones Industrial Average jumped about 60 points as Bernanke's name leaked out, and was trading up 110 points -- at 10,325 -- at midday.

  The Fed chairman is the most important economic job in Bush's gift. The Fed is the US' central bank -- an independent body in charge of monetary policy, setting interest rates and overseeing the integrity of the banking system. Comments from the chairman can move markets worldwide.

  Senator Richard Shelby, chairman of the Senate Banking Committee, who will lead the hearing empowered to confirm the appointment, seemed to suggest that there would be few hurdles.

  He described the nomination as a "good appointment" and said he hoped to hold the confirmation hearing "as soon as possible."

  Flanked by Greenspan and Bernanke, Bush said in the Oval Office that Bernanke had "deep respect in the financial community" and was "the right man to build on the record Alan Greenspan has established."

  Bernanke is unlikely to take the Fed in a sharply different direction to Greenspan. He said that, if confirmed, "my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years."

  One welcome difference noted by economists was that he speaks in plainer English than the outgoing chairman's notorious obfuscations.

  The other two contenders named as possible candidates had been the economists Martin Feldstein of Harvard University and Glenn Hubbard of Columbia University.

  Observers in Washington had said it was imperative for the Bush administration to make an appointment that would be well-received, and to do so quickly to restore some credibility to a White House roiled by controversies including possible connections to the leak of a CIA agent's name, its response to Hurricane Katrina and the nomination of Miers.

  "Bernanke carries a lot of credibility in the marketplace," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "He's well-respected in terms of his knowledge and his experience at the Fed. He is seen as a very capable and credible candidate that would prove reassuring in the near term."

  Greenspan had a formidable reputation. Bush described him on Monday as a legend.

  He was nominated by the late president Ronald Reagan and became the longest-serving Fed chairman in history. He steered the US through two recessions -- in the early 1990s and in 2001 -- financial meltdowns in Asia and Latin America, terrorist attacks and an unprecedented wave of corporate scandals.

  He coined perhaps his most famous phrase when he accused the dotcom markets of suffering from "irrational exuberance."

  Economists worldwide have become used to wading through his addresses to get a hint of likely market movements. He has in recent years helped to shape the debates surrounding social security, tax cuts and the federal debt.
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