Greenspan’s forecast may include his own future

Associated Press

WASHINGTON — When Federal Reserve Chairman Alan Greenspan goes before Congress today to deliver the Fed’s new economic forecast, investors will be listening for hints about his own future as well as the economy’s.

The issue of whether Greenspan, now in his 15th year as Fed chairman, will leave the central bank before his term is over in June 2004 has become a hot subject on Wall Street.

The Blue Chip Economic Indicators forecasting newsletter even polled its 52 top economic forecasters this month for their picks of who should succeed Greenspan. The top choice: Treasury Undersecretary John Taylor, an academic economist who served on the Council of Economic Advisers for President Bush’s father.

Those who believe the chairman may be contemplating an early exit point to the calendar. Greenspan, who will turn 76 next week, has already served in the Fed job longer than all but one of his predecessors.

With the economy apparently pulling out of recession, why not step down at the top of your game? these analysts ask.

The election calendar also plays a role in the leaving-early scenario. Greenspan’s term ends in the middle of an election year, a tough time to get a new nominee through Senate confirmation.

"If Greenspan wants to give the existing president the opportunity to appoint the new chairman, he will turn in his resignation sometime early next year," said Lyle Gramley, a former Fed board member.

Both Gramley and Mark Zandi, chief economist at Economy.com, said a return to strong growth would pinpoint 2003 as a perfect time to step down.

"The economy will be on sounder ground then. It will have gone through the recession and Greenspan will feel more comfortable about the recovery at that point," Zandi said.

Analysts said they looked for Greenspan to deliver an upbeat economic forecast before the House Financial Services Committee on Wednesday, indicating that the country’s first recession in a decade is drawing to a close and will be followed by moderate growth and low inflation.

When asked about the retirement rumors on Tuesday, Fed spokesman David Skidmore gave the standard Fed response: "It is our practice not to comment on rumors."

Asked about the speculation last week, Lawrence Lindsey, the head of Bush’s National Economic Counsel and someone often mentioned as a possible Fed chairman, said he believed Greenspan was staying put.

"This is at least the 20th time in the last 10 years that there have been rumors in the financial market that Alan is going to retire," Lindsey told reporters. "I had lunch with him yesterday. … He has no intention of going anywhere."

Private economists in the staying-put camp say the only thing that would make Greenspan leave early would be if his health started to fail, something that is not evident in his still-vigorous tennis game.

"He is perfectly happy in the job and there is not an inkling of truth to the rumor that he is going to leave early," said David Jones, chief economist at Aubrey G. Lanston &Co. in New York and the author of a new book on the Greenspan Fed.

Jones also said there was no evidence the administration would like to see Greenspan leave early.

After the Republican Taylor, the next two vote-getters in the Blue Chip poll were Democrats: William McDonough, president of the New York Fed, and former Clinton Treasury Secretary Robert Rubin. They were followed by Republicans Lindsey and Harvard economist Martin Feldstein.