Updated from 1:16 p.m. EDT
President Bush renominated Alan Greenspan for a fifth and final term as chairman of the
Federal Reserve Board
Tuesday, voicing a widely anticipated vote of confidence in the 78-year-old central banker who has guided the U.S. economy for a decade and a half.
The appointment, which comes ahead of the June 20 expiration of Greenspan's current term, covers an additional four years. But the Fed chairman is almost certain to step down in January 2006 when his appointment as a Federal Reserve governor ends and cannot be renewed.
"Alan Greenspan has done a superb job as chairman of the board of governors of the Federal Reserve System, and I have great confidence in his continued stewardship," read a statement from the president.
The renomination cements Greenspan's leadership during what could be a thorny few months for the Fed. The bank, whose primary charge is defending the dollar against inflation, has been moving gingerly toward an interest rate hike amid signs the economic recovery is picking up steam. Its task is complicated by political pressures that have traditionally restrained the Fed from acting during the second half of an election year.
Still, Greenspan is a known quantity, and Bush was never seriously thought to be considering another candidate.
"It was very well anticipated that he would be reappointed," says John Lonski, chief economist for Moody's Investors Service. "You're not going to try and rock the boat."
Bush said about a year ago that he intended to nominate Greenspan for another term, and Greenspan indicated at the time that he would accept. While the sitting administration has voiced few criticisms of Greenspan's Fed, the chairman has occasionally raised Republican ire by warning about lingering dangers in the federal budget and social security program.
"Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," Greenspan said in a May 6 speech.
Most Republicans were thrilled with Greenspan's aggressive efforts to revive the economy following the bursting of the stock market bubble, a campaign that took fed funds from 6.5% in May 2000 to a 45-year low of 1% in June 2003, where they remain still. The most recent statement of the Federal Open Market Committee, the Fed's policymaking arm, said the central bank plans a "measured" response to the growing threat of inflation in coming months. Many think the committee will announce an interest rate hike when it meets June 29 and 30.
In his statement Tuesday, Bush said Greenspan has "helped unleash the potential of American workers and entrepreneurs, and America's economy is now growing at the fastest rate in two decades."
Greenspan's nomination requires the approval of the Senate after a review by the Senate Banking Committee. Few, if any, delays are foreseen.