Who should replace Alan Greenspan as Chairman of the FED?

Essay by jimtc17University, Master'sA+, February 2006

download word file, 6 pages 0.0

Downloaded 31 times

January 31st was a momentous day for financial markets. It was Alan Greenspan's last day as Chairman of the Federal Reserve, without a doubt the world's most important financial job. After an 18 year tenure, he will be replaced by Ben Bernanke. The Chairman of the Federal Reserve is so important because he chairs the Federal Open Markets Committee (FOMC), the body that sets US interest rates (www.ocbc.com). US interest rates are important because they represent the price of money in the largest economy in the world (they also influence the price of money in many other economies too). It is no exaggeration to say that if the FOMC sets interest rates too high, it could produce a global recession, and if it sets them too low, it could allow global inflation to reawaken. During his 18 years as Chairman, Alan Greenspan came to dominate the FOMC to the point where his views were judged far more important than those of the other members.

Especially in times of crisis, Alan Greenspan got what he wanted in the way of US interest rate policy. It remains to be seen if Ben Bernanke will dominate the FOMC in quite the same way. Regardless of if Bernanke lives up to the standard set by Greenspan, he is the right man for the job.

The economy is growing but slowing. Consumers are spending but are more indebted than ever. Home values are dizzying but the market is cooling. No one seems to know whether inflation is rising, flat, or simply no longer relevant. Basically, it's a tough time to be America's central banker. Now double the pressure. Former Princeton University and White House economist Ben Bernanke not only takes over as chairman of the Federal Reserve, he replaces a man many regard as...