By Mel Duvall  |  Posted 2005-04-06 Email Print this article Print

How does Federal Reserve chairman Alan Greenspan decide to raise rates a quarter point? By analyzing a potent mixture of raw pecuniary data and computerized economic intelligence against first-hand reports from key hubs of U.S. financial activity and five

A Daunting Role

When Greenspan retires next year, the mind of the next chairman will be judged against the synapses of his predecessor.

John Lipsky, vice chairman of JP Morgan's investment bank, says Greenspan will be hard to follow. "During his tenure, the U.S. economy returned to 40-year lows in inflation and the longest sustained expansion in modern history," Lipsky says. "The Federal Reserve's credibility is at an all-time peak."

The rumor mill has several current governors as front-runners, notably Ben Bernanke and Donald Kohn. Outsiders mentioned include Undersecretary of the Treasury for International Affairs John Taylor, Harvard professor Martin Feldstein, and former head of the Council of Economic Advisers Glenn Hubbard.

No matter who replaces Greenspan, only so much knowledge can be transferred through books of different color or conversation with the former chairman.

But while the new chairman won't have Greenspan's own expertise, instincts or intuition, he will be surrounded by the same governors, reserve bank presidents and career economists who aided Greenspan's every move. The analysis software also will still be there, providing the newcomer with the means to analyze Greenspan's past actions and their results.

"Losing talented people is something every organization has to deal with," says San Francisco Fed research chief Furlong. "But there is a large degree of continuity, an ongoing sharing and dissemination of data that takes place here."

Incoming chief executive officers at Walt Disney, Boeing, British Airways, Sony and insurer AIG generally only hope to encounter such continuity and such resources at their fingertips in their new jobs.

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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