Greenspan’s successor could be a dark horse

Ethan Harris, chief U.S. economist for Lehman Bros. and a former Fed staffer, said Bernanke is still the most likely option, but Harris rates Bernanke’s chances at only 30 percent. He said there is a 40 percent chance the post goes to somebody other than the three names most frequently mentioned.

But neither he nor anybody else following the process closely has come up with the name of a business person or Wall Street executive who seems like a feasible candidate. Occasionally analysts mention Citigroup executive and former Treasury Secretary Robert Rubin, but his role as a top adviser to Democrat John Kerry's presidential campaign makes him a highly unlikely prospect.

One long-shot candidate who is being discussed with increasing frequency is Donald Kohn, a career Federal Reserve staffer who is a protégé of Greenspan and was named to the Fed’s board of governors by President Bush in 2002, although he is politically independent.

Kohn, 62, is a favorite of many bond market specialists and economists because of his 35 years of experience at the Federal Reserve and ties to Greenspan that are so close some analysts call him a "clone" of the chairman.

“I would not rule him out,” said Valliere. “He is just really solid and he is not an ideologue at all.”

Kohn is handicapped by the fact that he is relatively unknown on Capitol Hill and Wall Street, and the Bush administration may prefer to choose someone who has a more established record of sharing its views on tax policy.

“He is kind of the ideal candidate on paper because he has all the technical elements you want in a Fed chairman,” said James Glassman, senior economist at J.P. Morgan Chase and another former Fed staffer. But he said Kohn may not have the “political stature” needed for someone who will in effect become the chief interpreter of economic and monetary policy for Congress and the public at large.

Other names floated recently include those of Manuel Johnson, a Reagan-era Treasury official and former Fed governor, and Robert McTeer, longtime president of the Dallas Fed who is now chancellor of the Texas A&M University system.

White House spokesman Scott McClellan said last week the nomination was a “priority” for Bush, but he declined to speculate on timing.

With a busy agenda dominated by the Supreme Court vacancy and recovery from Katrina, analysts are divided over whether Bush will make his nomination soon enough for the Senate to consider before its December holiday recess.

If not, the Senate would have only a few days after it reconvenes in January to approve a new chairman before Greenspan’s term expires Jan. 31. While Greenspan is not eligible for reappointment, he would remain in office until a new chairman is confirmed, so it would technically be possible for him to continue beyond his retirement date.

But Greenspan has signaled he intends to retire on time, shortening a scheduled two-day meeting in January to make way for his presumed successor.

Glassman said he did not expect a major controversy around the nomination of a new Fed chief, noting that monetary policy is not an issue that typically inflames strong political passions.

“The divisiveness over social issues really does not come into play with the Fed,” he said. “There is no Republican or Democratic monetary policy.”

But Meyer said it was important for Bush to name a successor to Greenspan soon to ensure a smooth transition.

“It is a very important appointment,” Meyer said. “Whoever it is, Congress should be given sufficient time for a very serious vetting process.”

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