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| President Bush nominates his chief economic adviser, Ben Bernanke, to succeed Alan Greenspan as Federal Reserve Chairman. (October 24) |
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NEW YORK (Fortune) -
Whether it's a reflection of the current political weakness of the Bush administration or just another sign that you can't fight the Fed, the president's choice of Ben Bernanke to be the new Federal Reserve chairman is a remarkable victory of technocracy over politics.
This is a president who in his appointments has habitually favored political loyalty and personal rapport over qualifications and credibility, whose picks for top jobs have often stumped the odds makers.
Yet here he has gone and chosen a Fed chairman who for months has been touted as the most likely choice, a Princeton economics professor who is one of the world's foremost experts on monetary policy.
Yes, Ben Bernanke is a Republican, and he has succeeded in keeping himself on the president's good side during four months as chairman of the Council of Economic Advisers (chiefly by keeping his mouth shut in public, one assumes).
But Bernanke's decades of academic writings and his utterances during three years spent as a member of the Federal Reserve Board, from 2002 to 2005, indicate that he'll be the sort of Fed chairman who identifies far more closely with the institution he runs than with the administration that appointed him.
That will mean a Federal Reserve that continues, as it has for the past quarter century, to define its main job as keeping inflation in check. Bernanke has in the past even favored setting an explicit target -- say, 2 percent annual inflation -- for the Fed to aim for.
There are still a lot of unknowns, of course.
Will Bernanke weigh in on Congressional battles over fiscal policy, as current Chairman Alan Greenspan did, or keep a lower profile?
Will he be as adept as Greenspan at persuading the other members of the Federal Open Market Committee to support his interest-rate views?
Will he move as quickly as Greenspan to avert market crises like the 1987 crash or the 1998 meltdown of hedge fund Long Term Capital Management?
That we'll just have to find out.
In the meantime, though, it's clear that continuity and credibility have won out over politics in the Bernanke nomination.
Barring a revolt by supply-side zealots who wanted Bush to pick one of their own -- which was really never in the cards -- this may shape up to be one of the least controversial major appointments of the Bush presidency. Which, after Harriet Miers, is probably exactly what the President wanted.
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Bernanke's the man, click here for more.
Who will replace Greenspan? Who cares! Click here.
For a look at Greenspan's stewardship of the Fed through four presidents, two wars and two market crashes, click here.
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