Newspaper article THE JOURNAL RECORD

Ready for a World without Greenspan?

Newspaper article THE JOURNAL RECORD

Ready for a World without Greenspan?

Article excerpt

Sometime over the next 365 days - specifically when is anyone's guess - the stock market and the average investor will start getting a little antsy over Alan Greenspan, Oklahoma economists and stock analysts said.

That's because the Federal Reserve chairman's term expires at the end of January 2006 and Greenspan will relinquish his direct oversight of the nation's economy. After nearly 20 years in the position, Greenspan has said he has no intention of signing on for another term.

Exponentially, as we approach that date of announcement, there will be a lot more attention in the market, said Bob Dauffenbach, associate dean of the University of Oklahoma's Price College of Business. They'll worry about the uncertainty factor, and we know markets tend not to like uncertainty very much. I think it's one of those things that's going to weigh on the market.

Greenspan, 78, has outlasted several presidents and stands to break the record for longest-serving Fed chairman if he opts to remain on board for a few more months after his term expires. He has said he doesn't intend to last through President Bush's second term.

The Federal Reserve's legal responsibility to the country is to apply monetary policy to minimize inflation and maximize employment. The selection of Greenspan's replacement is bound to have as much of an impact on the national - and international - economy as the chairman's own decisions in office.

Bob Rader, senior vice president at Capital West Securities in Oklahoma City, said to avoid a knee-jerk reaction, government officials will try to acclimate the public over the next several months.

They will start releasing it in a slow trickle of information to avoid a surge reaction, Rader said. The Federal Reserve learned several years ago that the marketplace does not like surprises. So what we've seen is that if the Fed is going to make a move on interest rates, for example, they start profiling it and leaking it long before it happens so that when it happens it's a non-event. And I think the same thing will happen for the chairman's announcement.

If the Fed chairman announced today, 'Hey, I'm out of here,' I think the market would go down some, said Rader. But I think they've learned better than that. A quarter-point increase in interest rates used to be a big deal. Now it's a big yawn.

Economists and pundits on Wall Street have named several likely contenders for Greenspan's seat, including front-runner Harvard economist Martin S. Feldstein and Columbia Business School Dean R. Glenn Hubbard. Fed Vice Chairman Roger Ferguson Jr. also is mentioned frequently, as is Stanford economist John B. Taylor, Treasury undersecretary.

If John Kerry had won the presidential election, experts say he would have leaned more toward Robert E. Rubin, who served as Treasury secretary during the Clinton administration, or Harvard President Lawrence Summers, Rubin's successor. …

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