Clinton renominates Greenspan as Fed chief

News of Greenspan’s renomination helped push US treasury bond prices up on Tuesday, but had little effect on the stock market, where traders said prices fell on growing expectations that the Federal Reserve will raise interest rates next month.

Clinton’s announcement won quick praise from top Senators, who predicted that Greenspan’s reappointment to a new four-year term would sail through the Republican-led Senate that must confirm the President’s decision. Clinton was unstinting in his praise of Greenspan at an Oval Office ceremony, giving the central banker much of the credit for the remarkable health of the US economy.

"For the past 12 years chairman Greenspan has guided the Federal Reserve with a rare combination of technical expertise, sophisticated analysis and old-fashioned common sense," Clinton said. "Clearly wise leadership from the Fed has played a very large role in our strong economy."

Greenspan said he appreciated Clinton’s commitment to fiscal discipline, one of the factors that economists say has given the US economy what will be its longest expansion ever if it extends to February. "My colleagues and I have been very appreciative of your support for the Fed over the years and your commitment to fiscal discipline, which has been instrumental in achieving what in a few weeks will be the longest expansion in the nation’s history," the central bank chief said.

February would mark a record ninth year of expansion for the US economy, which is enjoying a rare combination of high growth, low unemployment and tame inflation.

Greenspan, who rarely replies to reporters’ questions, said he had decided to remain in the job if confirmed by the Senate in part because of the intellectual challenge, which he said he found as addictive as eating peanuts. "There’s a certain really quite unimaginable intellectual interest that one gets from working in the context where you have to put broad theoretical and fairly complex conceptual issues to a test in the marketplace," Greenspan said.

"It’s like eating peanuts. You keep doing it, keep doing it and you never get tired because the future is always ultimately unknowable," he added.

Clinton said he had had no difficulty in persuading the vigorous, tennis-playing Greenspan to stay in what is one of the most demanding and influential jobs in economic policy. "I asked him and he said yes’," Clinton said simply.

A senior US official said Clinton’s aides unanimously recommended that he ask Greenspan to serve another term. They said White House Chief of Staff John Podesta approached the central banker about the job before the Christmas holidays.

On Capitol Hill, legislators were quick and lavish with their praise of Greenspan. Senate Majority Leader Trent Lott of Mississippi said he saw no problem with Greenspan’s reappointment. The Senate Banking Committee planned to hold hearings on the matter on January 26 and its chairman, Sen. Phil Gramm, saw no obstacles. "I believe Alan Greenspan has been the finest in a long line of great central bankers," said the Texas Republican.

The reappointment should remove Greenspan as an issue in the 2000 presidential election. Vice President Al Gore, who may enjoy the traditional benefit that accrues to incumbents during a period of strong economic growth, hailed the decision.

"I’ve also made it no secret that I feel a key player in this period of economic prosperity has been … Greenspan," Gore said, saying he had done "a remarkable job in managing the Federal Reserve and our nation’s monetary policy."

Greenspan was first appointed to the Fed by the then president Ronald Reagan in 1987. His current four-year term as chairman expires in June and his separate 14-year term as a Fed board member runs until early 2006.

A man of famous discretion, he declined to say on Tuesday if there may be some "irrational exuberance" in the stock market. He made the remark in December 1996, when the Dow Industrials were around 6,400. They are now around 11,000.

Stock prices have been hit since the beginning of the year as the investors have increasingly focused on the chances of the Federal Reserve tightening interest rates at their next meeting on February 1-2 to keep the economy from overheating.