Reply #44: Greenspan May Remain Chairman a Little Longer

[54anickel]

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_berry&sid=aMi8rALrcumU

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To get a new chairman confirmed this year, Bush needs to move exceptionally fast because Congress would like to adjourn as early in the fall as possible. There is no hint he will do that, and Karl Rove has said Bush doesn't want to undermine Greenspan's authority by naming a successor before his term expires.

Under the law, a member of the Board can continue to serve until a successor has been nominated and then confirmed by the Senate. In other words, Greenspan could easily still be chairman when it's time for the next monetary policy report in February.

The problem with a delay is that even without the chairmanship up in the air, around the turn of the year there is likely to be plenty of uncertainty about Fed policy -- and perhaps significant market volatility as a result.

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Greenspan has said he and his colleagues will be able to know when they have moved the target into the neutral range. Some other officials indeed worry that they may overshoot before they recognize where they are.

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``You don't have the same burden of transparency with an easing,'' he said. ``When it comes to cutting rates, you don't have to apologize'' for surprising the market.

The scenario Kim and DiClemente are describing might well play out early next year. It is hardly comforting that the future of the chairmanship may be uncertain as well. Unfortunately, given the White House timetable, and the potential for some opposition to Bush's choice, it could easily be March, April or even May before Greenspan's successor actually moves into the office on Constitution Avenue.

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