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Experts Predict Transition to New US Central Bank Chairman Will Be Challenging


On January 31 Alan Greenspan retires from the chairmanship of the Federal Reserve Board, the U.S. central bank that he has headed for 18 years. Experts say the transition to incoming chairman Ben Bernanke may not be as smooth as some would predict.

Larry Lindsey, who served six years as a governor of the Federal Reserve Board, working closely with its chairman, Alan Greenspan says Greenspan's departure is similar to a long-serving chief executive officer (CEO) leaving a major company.

"Whenever the CEO departs it is a challenging period for the organization. And that is even more so when the CEO has been in office 18 years. And not only that, when the CEO is widely viewed as having been successful," said Lindsey, who is now a scholar at Washington's American Enterprise Institute, .

Greenspan will be succeeded by Ben Bernanke, a Princeton University economics professor who served briefly as a Federal Reserve governor and who is currently President Bush's top economic adviser. Lindsey says Bernanke, 52, is bound to be tested by financial markets, Congress, and perhaps, by external events during his first few months in office.

"Following in the footsteps of a successful CEO at any company is a tough thing to do. That is complicated at this time by the fact that the product of the Fed, monetary policy, is one in which the conditions are shifting," he said.

At an American Enterprise Institute forum on monetary policy Tuesday, Columbia University professor Charles Calomiris says that. Bernanke will be under pressure to halt the 20-month long period of monetary tightening, in which there were 13 consecutive quarter point rises in short-term interest rates, designed to ward off mounting inflationary pressure. Calomiris says to establish his credentials as an inflation fighter, Bernanke is likely to advocate further rises in interest rates.

"He (Bernanke) is going to have to surprise the market on the upside in terms of interest rates in the first few months of his chairmanship.

A major risk during a period of monetary tightening is that interest rates go too high, squeezing consumer borrowers and choking economic growth.

Like Greenspan, Bernanke has been an attentive student of monetary policy. Harvard University professor Richard Cooper says one of Greenspan's strongest attributes was his ability to analyze economic data.

"He (Greenspan) has a very good feel for the American economy. He absorbs a tremendous amount of information, immerses himself in the data," Cooper said.

Bernanke's principal interest in monetary history has been the 1930s when the Federal Reserve maintained a tight monetary policy in the face of a dramatically weakening economy. Bernanke assumes his new position on February 1.

VOA Mandarin correspondent Wang Ge contributed to this report.

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