Wednesday, May 18, 2005
Extending the Fed Head’s Term?
The Washington Post reported today ("Administration Considers Delaying Fed Chief’s Exit; And Extra Few Months Would give Greenspan the Longest Tenure", Nell Henderson, May 18, 2005; http://www.washingtonpost.com/wp-dyn/content/article/2005/05/17/AR2005051701586.html) that the Bush administration was considering extending Chairman Alan Greenspan’s term a few months so that they would have more time to find a better replacement in the corporate world. Surprising since the administration has known since it took office (2001) that Greenspan cannot serve past January 2006.
The idea that the Bush administration needs more time to cast a wider net in the search for a new Fed Head is a tacit acknowledgment that they are having trouble finding a replacement–or better they fear that Greenspan’s departure would send financial markets sharply lower. Particularly worrisome is that international investors could be frightened at a time when the USA is running massive trade deficits that need to be financed with foreign funds.
As we noted in "Be Prepared Don’t let the Upcoming Financial Crisis serve as 9-11 did to push the Bush Agenda" (http://www.jubileeinitiative.org/BePrepared-CapitalAccountProblem1.htm ) Fed Head Alan Greenspan’s departure would make the markets jittery and could lead to calamity. Others such as Paul Krugman of the NY Times "The Greenspan Succession", January 25, 2005 have voiced similar concerns. This runs counter to others such as Ravi Batra in his recent book, "The Greenspan Fraud–How Two Decades of His Policies Have Undermined the Economy", who feel that Greenspan has lost much of his luster on Wall Street since 2000 when stocks began declining. We disagree, Greenspan gives Wall Street its luster and vice versa.
By buying more time the Bush administration would avoid being cornered into a time line for choosing the next Fed Head. Arguably they could keep postponing making a decision. More time will allow them to float more trial balloon candidates. Call it gradualism.
Keeping the Fed Head beyond his term would also further politicize the Fed as Tom Schlesinger of Financial Markets Center said in the Washington Post article. The Federal Reserve is suppose to be an independent organization that serves the interest of all Americans. But this has not been the case with Fed Head Greenspan. As George Melloan of the Wall Street Journal’s Op-ed page ("Alan Greenspan–The Money Man Everyone Loves", May 25, 2004) noted, Greenspan is not only "a known Republican, but a disciple of libertarian Ayn Rand, whose ideas were anathema to the far left" (see our May 26, 2004 Press Release)
Chairman Greenspan as we have noted on several occasions has consistently over-stepped his position as Fed Head to help the Bush administration and push their radical agenda. As Professor Thomas of Wharton noted (Charleston Courier and Post, Barrons (Up and Down Wall Street) May 24, 2004) visits by Greenspan to the White House had surged under the Bush administration. Most recently Greenspan has been one of the few voices backing the Bush social security plan of private accounts. As we ( http://www.jubileeinitiative.org/FederalReserve1.html ) and others have noted Greenspan flip flopped on fiscal austerity in 2001 and endorsed the Bush tax cut. And much, much more
Postponing Greenspan’s retirment from the Fed is another example of the Bush administration’s brazen and open flouting of the rule of law. Should Greenspan agree to stay over it would be another example of his brazenly and openly flouting the law.
This could all be for not naught and the Washington Post article could be a trial balloon that fizzled. But given that the market was up 132 points, with contributing factors, the rumors could be true....But remember...to buy the rumors and sell the news......should we later learn that the Fed Head will stay a bit longer.
The idea that the Bush administration needs more time to cast a wider net in the search for a new Fed Head is a tacit acknowledgment that they are having trouble finding a replacement–or better they fear that Greenspan’s departure would send financial markets sharply lower. Particularly worrisome is that international investors could be frightened at a time when the USA is running massive trade deficits that need to be financed with foreign funds.
As we noted in "Be Prepared Don’t let the Upcoming Financial Crisis serve as 9-11 did to push the Bush Agenda" (http://www.jubileeinitiative.org/BePrepared-CapitalAccountProblem1.htm ) Fed Head Alan Greenspan’s departure would make the markets jittery and could lead to calamity. Others such as Paul Krugman of the NY Times "The Greenspan Succession", January 25, 2005 have voiced similar concerns. This runs counter to others such as Ravi Batra in his recent book, "The Greenspan Fraud–How Two Decades of His Policies Have Undermined the Economy", who feel that Greenspan has lost much of his luster on Wall Street since 2000 when stocks began declining. We disagree, Greenspan gives Wall Street its luster and vice versa.
By buying more time the Bush administration would avoid being cornered into a time line for choosing the next Fed Head. Arguably they could keep postponing making a decision. More time will allow them to float more trial balloon candidates. Call it gradualism.
Keeping the Fed Head beyond his term would also further politicize the Fed as Tom Schlesinger of Financial Markets Center said in the Washington Post article. The Federal Reserve is suppose to be an independent organization that serves the interest of all Americans. But this has not been the case with Fed Head Greenspan. As George Melloan of the Wall Street Journal’s Op-ed page ("Alan Greenspan–The Money Man Everyone Loves", May 25, 2004) noted, Greenspan is not only "a known Republican, but a disciple of libertarian Ayn Rand, whose ideas were anathema to the far left" (see our May 26, 2004 Press Release)
Chairman Greenspan as we have noted on several occasions has consistently over-stepped his position as Fed Head to help the Bush administration and push their radical agenda. As Professor Thomas of Wharton noted (Charleston Courier and Post, Barrons (Up and Down Wall Street) May 24, 2004) visits by Greenspan to the White House had surged under the Bush administration. Most recently Greenspan has been one of the few voices backing the Bush social security plan of private accounts. As we ( http://www.jubileeinitiative.org/FederalReserve1.html ) and others have noted Greenspan flip flopped on fiscal austerity in 2001 and endorsed the Bush tax cut. And much, much more
Postponing Greenspan’s retirment from the Fed is another example of the Bush administration’s brazen and open flouting of the rule of law. Should Greenspan agree to stay over it would be another example of his brazenly and openly flouting the law.
This could all be for not naught and the Washington Post article could be a trial balloon that fizzled. But given that the market was up 132 points, with contributing factors, the rumors could be true....But remember...to buy the rumors and sell the news......should we later learn that the Fed Head will stay a bit longer.
