ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, February 20, 1996 TAG: 9602200054
SECTION: BUSINESS PAGE: B6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: ASSOCIATED PRESS
HE HAS HELPED hold down inflation during a growth period - just as he is up for renomination.
Alan Greenspan won't be on any ballots this election year, but he could certainly teach the current crop of candidates a thing or two about timing.
His campaign to be renominated for a third term as chairman of the Federal Reserve - a post many consider the second most powerful in the country - is peaking at just the right moment.
The economy appears successfully headed into the sixth year of an economic expansion, third longest on record; his relations with the Democratic White House are first-rate; and even more importantly, he is held in respect bordering on awe by the Republicans who control Congress.
While President Clinton has not publicly said he will reappoint Greenspan, administration officials, speaking on condition of anonymity, said an announcement is imminent.
``Regardless of whether you consider Greenspan's renomination on the merits or the politics, it simply has got to happen,'' said Allen Sinai, chief global economist at Lehman Brothers.
Greenspan will appear today before the House Banking Committee to give his twice-a-year report to Congress on the health of the economy. While the blizzard of '96 and jittery consumers are expected to depress growth in the current quarter, Greenspan is certain to join the bulk of private forecasters in predicting better times ahead.
``When Greenspan testifies before Congress, he will make it very clear that he is doing everything to minimize the risk of a recession,'' said Robert Dederick, chief economic consultant at Northern Trust Co. in Chicago.
In many ways, Greenspan's path to a third term, something only two other men have accomplished in Fed history, was easier than his reappointment four years ago when Republicans controlled the White House.
Greenspan, 69 and a longtime Republican, was first picked as Fed chairman in 1987 by Ronald Reagan. But George Bush delayed reappointing him in 1991 because of unhappiness over Greenspan's refusal to cut interest rates quickly enough to avoid the 1990-91 recession, or boost growth more quickly before the 1992 election.
Whether intentional or not, Greenspan has done much better by Clinton. The Fed began raising rates in a pre-emptive strike against inflation in February 1994 and now has the luxury of being able to cut rates in an election year.
Greenspan's maneuvers seem to have accomplished the often-talked-about but seldom-achieved feat of slowing growth enough to keep inflation under control without bringing on a recession.
``Greenspan has done a masterful job of achieving the elusive soft landing,'' said David Jones, chief economist at Aubrey G. Lanston & Co. and the author of two books on the Greenspan Fed. ``He couldn't be considered for a third term at any better moment.''
That doesn't mean that the White House doesn't have some quibbles. The president complained last week that the Fed should be debating whether its target for sustainable growth of around 2 percent to 2.5 percent couldn't be set higher without generating inflation.
But Clinton's choice to lead that debate as Fed vice chairman, New York investment banker Felix Rohatyn, was shot down by conservative Republicans who saw him as a big-government liberal.
Many economists believe that Clinton could well decide to renominate Greenspan but hold off filling the other two vacancies on the seven-member board until after the November election.
Despite his political savvy, Greenspan does have his detractors. Critics point to recently released transcripts of the Fed's 1990 deliberations which showed that Greenspan misjudged the severity of the economic slowdown, not moving to aggressively cut rates until well after the onset of the downturn.
But that has been about the only serious misstep in Greenspan's long tenure, according to analysts, who believe Greenspan's greatest achievement has been building on the inflation-fighting record of his predecessor, Paul Volcker.
``Look at all the shocks that have come and how well we have weathered them. The central bank has had an extraordinary record for nearly two decades under Volcker and Greenspan,'' Sinai said.
LENGTH: Medium: 81 lines ILLUSTRATION: PHOTO: headshot of Greenspan color<by CNB