Bush nominates Bernanke as next Fed chief

Martin Wolk Chief economics correspondent • Profile • E-mail

President Bush Monday nominated Ben Bernanke, head of his Council of Economic Advisers, to succeed Alan Greenspan as chairman of the Federal Reserve, often described as the nation’s second-most powerful job.

Bernanke, 51, a former Fed governor and Princeton University economics professor who only took over his current White House job in June, long had been considered the favorite for the central bank post.

“He has earned a reputation for intellectual rigor and integrity, he commands deep respect in the global financial community and he will be an outstanding chairman of the Federal Reserve,” Bush said at an afternoon White House ceremony, where he was flanked by Bernanke and Greenspan.

Bernanke said that if confirmed by the Senate his “first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years.”

Although Greenspan said nothing at the brief White House appearance, his shadow looms large after an 18-year tenure in which he has come to embody the powerful central bank, moving financial markets with his comments and actions and serving as the top interpreter of the nation’s economic condition.

President Bush called Greenspan, 79, a “legend” who has “dominated his age like no central banker in history.”

In choosing the widespread favorite, Bush has taken a more conventional path after a series of recent stumbles including the poorly received nomination of Harriet Miers for the Supreme Court.

“The Harriet Miers fiasco really prompted them to go with the safest choice, the one the markets were expecting,” said Greg Valliere, chief strategist for Stanford Washington Research Group Stanford Washington Research Group. “He couldn’t get too exotic with this pick.”

Stock prices surged after news of the Bernanke nomination emerged in wire reports shortly before noon ET as the lingering uncertainty over the nomination was lifted. The Dow Jones industrial average ended with a gain of nearly 170 points, its strongest performance in six months. Bond prices fell, sending long-term interest rates slightly higher.

While bond investors might be expressing some skepticism, there is little question that Bernanke is well-qualified for the new job.

“He is trained for the job, he worked as a governor and when he was governor he spent a lot of time looking at practical issues around monetary policy,” said Ethan Harris, chief U.S. economist at Lehman Bros. “He has hung around the Fed for many years as an adviser. He certainly has the respect of many in the institution, so the handoff is pretty smooth.”

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