Silent Political Issue: Nominations to the Fed Board ; Next President Will Appoint Five of Seven Fed Governors, Shaping America's Finances

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Ask almost any American what key positions the new president will appoint, and the answer will likely be his Cabinet and vacancies on the Supreme Court.

They are missing a third category that could have a great impact on their lives: top Federal Reserve policymakers.

The new White House occupant will end up naming at least five of seven Fed governors to 14-year terms - and possibly pick a successor to Alan Greenspan as Fed chairman. Just as White House appointments influence the nation's judicial climate, the president's Fed nominations will help set the pace and tone of the economy, affecting everything from mortgage rates to the way banks do business.

Both Al Gore and George W. Bush have hinted they would reappoint Mr. Greenspan, should he wish to stay in his job when his current four-year term expires in 2004. But they've said nothing specific about the other appointments, officials who would have - at least legally - equal voting rights on policy as the chairman.

Some think the silence is appropriate. "Voters ought to be indifferent with regard to Fed policy and the composition of the Fed board, including the chairman," says Andrew Brimmer, a Fed governor from 1966 to 1974 and now a Washington consultant.

Economist Tom Schlesinger disagrees. "No actions a president takes will have a bigger impact on citizens' economic well-being than the appointments he makes to the central bank's leadership and the way he tailors his relationship with the Fed," says the executive director of the Financial Markets Center, a nonprofit research group in Philomont, Va.

Most economists regard a wise monetary policy as crucial to the prosperity of the nation.

To some degree, the Fed controls the interest rates that Americans pay on their loans. It manages growth in the nation's money supply - the cash and credit that fuel an increasing output of goods and services. It strives to avoid high inflation.

Pilot of the economy

These days, Fed monetary policy usually has more influence on the business cycle than what the White House or Congress does. That's because they often don't agree on the direction of taxation and government spending.

A new book by Bob Woodward of Watergate fame tells how President Reagan, through his Chief of Staff James Baker III, pressured then Fed Chairman Paul Volcker directly and through appointments of Fed governors to lower interest rates. President Bush also pressured Greenspan to lower rates.

In this year's campaign, both Bush and Gore professed they would keep their political hands off monetary policymaking by the Fed, an independent agency.

Neither commented on current monetary policy. Nor did they specify the qualifications they will seek in new governors, other than generalizations about quality people and diversity.

Mr. Schlesinger figures voters should have been given a clue by the candidates on what sort of Fed officials they would appoint - their philosophies, their economic goals.

"The poor voting public doesn't have any idea" what the new president will do on Fed appointments or on international financial policy, he says. …