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Next Fed chief an open question

WASHINGTON -- As President Bush puts together his second-term Cabinet, the financial world's attention is on a job vacancy 14 months away. The question is who will succeed Federal Reserve chairman Alan Greenspan, now in his 18th year in the job.

The list of candidates being talked about is half what it was before the Nov. 2 election, when prominent Democrats such as former Treasury Secretary Robert Rubin were considered hot prospects, had Democratic Senator John Kerry of Massachusetts won the White House.

With Bush's reelection, the focus is on Republicans. Candidates include Harvard economics professor Martin Feldstein, chairman of the Council of Economic Advisers during the Reagan administration; Columbia University professor Glenn Hubbard, Bush's first CEA chairman; Treasury Undersecretary John Taylor; and Federal Reserve board member Ben Bernanke.

Handicappers generally put Feldstein, 65, on top, in part because he is the best-known. He has had a distinguished teaching career at Harvard and served from 1982 to 1984 as chairman of the CEA, a post that Greenspan used as a stepping stone to the Fed job.

Some say Hubbard, 46, might have an inside track because of his strong support for Bush's tax cuts. Also, doubts linger among some conservative GOP supply-siders about Feldstein, given his reputation as a deficit hawk.

Taylor, 57, gained prominence as a monetary expert at Stanford University. He developed the "Taylor rule," a formula designed to aid the Fed in setting interest rates. He has had trouble making an impact on administration economic policy in his current job.

Bernanke, 50, is viewed as the dark horse. Little known outside academic circles before coming to the Fed board in August 2002, Bernanke has impressed veteran Fed watchers, who read his speeches carefully for insights into Fed thinking on a range of economic issues.

Many believe Greenspan will play a large role in choosing his successor.

"I think that Greenspan will have an unusually large influence on the selection process, given his close relationship with Vice President Cheney, going all the way back to the Ford administration," said David Jones, author of four books on the Greenspan Fed.

Greenspan was President Ford's CEA chairman, and Dick Cheney was Ford's White House chief of staff.

Many see Greenspan's hand in appointments Bush has made to the Fed board, including Bernanke and Donald Kohn, a longtime Fed staff member on monetary policy.

Greenspan became Fed chairman in 1987, when he was picked by President Reagan to succeed Paul Volcker.

In June, Greenspan started his fifth four-year term as chairman. He has let it be known that he does not intend to serve past the end of his current term and separate 14-year term on the Fed board, which ends Jan. 31, 2006.

Many analysts say it could be this time next year before the White House nominates Greenspan's successor. The nomination is subject to Senate confirmation.

Analysts tend to dismiss the idea a successor might find succeeding Greenspan a daunting task.

"People said how tough it was going to be for Greenspan to succeed Volcker, but within a few months he had settled in and pretty soon he was his own legend," said Ted Truman, of the Institute for International Economics.

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