The Odds October 2005

Who Will Be the Next Fed Chairman?

When Alan Greenspan steps down as chairman of the Federal Reserve System, on January 31, it will mark the end of a nearly twenty-year run for one of the most respected and successful monetary puppeteers in the Fed's ninety-two-year history. Deciphering Greenspan's gnomic phrasings has long been a favorite Wall Street pastime. Now there's a new one: guessing who might succeed him. In June, President Bush tapped Ben Bernanke to chair his Council of Economic Advisers, fueling speculation that the Princeton economist may be the front-runner. When the Irish bookmaker Paddypower.com offered up odds on who will be confirmed as the next Fed chairman, irrationally exuberant bettors reacted like investors to a sizable interest-rate cut, and Bernanke jumped out to an early lead. But four other worthy candidates are in the mix. Here's a tip sheet on the action.

5 to 4: BEN BERNANKE

Why bet on him? The fifty-one-year-old left his position on the Federal Reserve Board to join the White House staff; he has worked closely with Greenspan and has the ear of the president.

Why not bet on him? There aren't many reasons. But here's one: even with his recent appointment to the Bush team, he has the least political experience of all the candidates.

9 to 4: R. GLENN HUBBARD

Why bet on him? The youngest of these candidates (forty-seven), he served as Bush's first economic adviser, and is credited with being the architect of many of the president's tax-cut policies. Upon resigning from his White House post in 2003 he wrote, "I hope that I may serve again."

Why not bet on him? In his 2003 resignation letter he also wrote that he was moving back to New York City to be with his wife and children, because "family needs are my most significant concern." Should the nation's economy have to play second fiddle?

4 to 1: MARTIN FELDSTEIN

Why bet on him? As a former economic adviser to Ronald Reagan, he's the biggest name here—and possibly the most conservative.

Why not bet on him? Dubbed "Dr. Gloom" for his concern about the rising deficit under Reagan, Feldstein, at sixty-five, is the oldest candidate on the list. He wasn't afraid to disagree with the president, which may scare Bush away.

8 to 1: DONALD KOHN

Why bet on him? The sixty-two-year-old has served on the Federal Reserve's board of governors since 2002, and on its staff for more than two decades. He's regarded as Greenspan's Dick Cheney.

Why not bet on him? Kohn isn't a registered Republican.

8 to 1: JOHN TAYLOR

Why bet on him? The fifty-eight-year-old Stanford professor, who served under the first President Bush, created the widely lauded "Taylor rule," a formula designed to help central banks like the Fed set interest rates.

Why not bet on him? He reportedly riled staffers during a stint at the Treasury Department a few years ago. (Also, he shares a name with the bassist for Duran Duran.)

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