President to nominate Fed chairman for fifth term

WASHINGTON -- President Bush, seeking to calm financial markets in uncertain times, said Tuesday he would nominate Alan Greenspan for a fifth term as chairman of the Federal Reserve.

Bush's endorsement came 14 months before the end of Greenspan's current four-year term and on the same day the 77-year-old Fed chairman underwent surgery for an enlarged prostate.

"I think Alan Greenspan should get another term," Bush said.

While the White House insisted the timing of Bush's announcement had nothing to do with the surgery, Wall Street analysts were unconvinced. They said it would make sense for Bush to put to rest rumors about Greenspan's future on a day when the routine surgery was certain to raise new speculation on the subject.

"The president's statement was necessary because there is too much economic uncertainty right now, and chairman Greenspan's prostate surgery was adding to that uncertainty," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.

After the market closed, the Fed put out a statement that said Greenspan's surgery for an enlarged prostate had been "routine and successful." The statement said Greenspan would remain in the hospital overnight and expected to be back at work this week.

Greenspan has not said whether he would accept a fifth term. However, many associates believe he would.

A Republican, Greenspan served as Gerald Ford's chief economist in the mid-1970s and took office as Fed chairman on Aug. 11, 1987, selected by then-President Ronald Reagan to succeed another Fed legend, Paul Volcker.

The chairman was re-nominated for the job once by Bush's father and twice by President Clinton. His current term as chairman ends June 20, 2004.

Greenspan has earned praise from all the presidents he has served for his handling of the national economy, which recorded the longest economic expansion in history during his tenure: March 1991 to March 2001.

Since that time, the country has endured a recession, a prolonged bear market on Wall Street, the Sept. 11, 2001, terror attacks and a wave of corporate accounting scandals. Greenspan and his colleagues at the Fed have responded with an aggressive campaign to cut interest rates, driving the benchmark federal funds rate to a 41-year low of 1.25 percent.

Greenspan has been the target of criticism, most recently from conservative Republicans incensed that the Fed chief raised doubts in February about the need for Bush's proposed new round of $726 billion in tax cuts. He said any future tax cuts should be paid for to avoid worsening the rising budget deficit and threatening government retirement programs.

Unidentified White House officials were quoted in published accounts as saying that Greenspan might be dumped next year. Administration officials publicly distanced themselves from such comments, however, and during the Iraq war they made a point of including Greenspan in regular White House briefings that other top economic officials were receiving on the impact of the war on the economy.

Analysts said it made sense for Bush to announce early that he planned to select Greenspan for another term, given how closely divided the Senate is between Republicans and Democrats. The nomination is subject to confirmation by the Senate, where Republicans hold a 51-48 advantage, plus one independent who normally votes with the Democrats.

"The administration is trying to signal to markets not to worry because Mr. Greenspan is going to be around," said David Wyss, chief economist at Standard & Poor's in New York.

Greenspan is already the second longest serving Fed chairman, surpassed only by William McChesney Martin, who served for 18 years and 10 months from April 2, 1951, to Jan. 31, 1970.

The chairman of the Fed serves a four-year term, while the term of a Fed governor is 14 years. Greenspan's term as a member of the seven-member Fed board runs until Jan. 31, 2006. Greenspan cannot be appointed for another term as a Fed board member, leading many analysts to believe that he will step down in early 2006 so that the next president can appoint a successor before the election in 2008.

On the Net

Federal Reserve: www.federalreserve.gov