Bernanke favourite as Greenspan successor

WASHINGTON - Federal Reserve Governor Ben Bernanke has the edge in the latest betting over who will succeed Alan Greenspan as Federal Reserve chief, but sources close to the Bush administration say it is still early in the decision process.

President Bush's decision earlier this month to nominate Bernanke to head the White House Council of Economic Advisers prompted speculation that the top White House economics job may be an audition for Greenspan's post.

"Bernanke is a strong Washington player with good insights," said William Beach, a scholar at the Heritage Foundation, a conservative think tank in Washington. "He's a nose ahead on this."

Scott Reed, a Republican political consultant, called Bernanke "the favorite of the month."

Many on Wall Street agree. A recent Lehman Brothers poll put him at the front of the pack, even before he was named to the top job at the Council of Economic Advisers.

Bernanke, along with Glenn Hubbard, a former CEA chairman, and Harvard economist Martin Feldstein have long been seen as the front-runners to replace the 79-year-old Greenspan, who must leave early next year when his Fed board term expires.

Bernanke associates say the Princeton University economist's interest in the council has more to do with wanting to try his hand at broad policy-making than with jockeying for the top Fed post.

Some analysts said the tight timing might be tricky for Bernanke, who still faces Senate confirmation for the CEA post and who will have logged less than a year in that job when Greenspan's position comes open.

Two sources with close administration ties played down the idea that any one candidate led the field, noting that the decision-making process appeared to be in the early stages.

Both said all three of the most cited candidates -- Bernanke, Feldstein, and Hubbard -- have a good shot.

One, a former administration official who spoke on condition of anonymity, said the White House could still turn to a prominent Wall Street figure, though it was likely to pick someone already in the mix.

"It's not like you're going to need to find some dark horse out of left field," said the source, who added that the decision-making will be a closely guarded process involving senior players like White House chief of staff Andrew Card and Vice President Dick Cheney.

Greenspan also is sure to wield influence.

Bush faces the more immediate task of replacing Bernanke at the Fed. Several Republicans said Richard Clarida, a Columbia University economist and former US Treasury official, fit the profile the administration is seeking and one source said he is indeed being considered.

If Bernanke wins Senate approval for the White House Council of Economic Advisers, he will join the other top contenders, along with Greenspan, in having CEA experience.

Greenspan was CEA chairman under President Gerald Ford. Feldstein led Ronald Reagan's CEA and Hubbard headed it for the first two years of the Bush administration.

Bernanke, one of the country's leading monetary policy economists, has become well-regarded on Wall Street since joining the Federal Reserve Board in 2002.

He also has developed a rapport with Greenspan, despite his long-standing advocacy for inflation targeting, a publicly stated inflation goal by a central bank, at the Fed -- a move Greenspan has opposed.

The Heritage Foundation's Beach said Bernanke possesses one credential crucial for any Greenspan replacement: The ability to translate econo-speak into plain language.

"Bush is going to want to appoint someone who can sit down with him and speak in a language he understands," Beach said.

Of the three candidates most mentioned, Hubbard -- a public finance expert at Columbia University -- has the closest White House ties from his years in the administration and his stint advising Bush's 2000 presidential campaign.

Feldstein, who also was an adviser to the 2000 Bush campaign, is said to visit Washington frequently.

"He's pretty well-connected," said the former US official, who pointed out that Feldstein would bring strong managerial experience to the Fed from his long tenure as head of the National Bureau of Economic Research.

One question mark, though, is Feldstein's role as a director of American International Group Inc., an insurer whose accounting practices are under investigation by the US Securities and Exchange Commission and New York Attorney General Eliot Spitzer.

- REUTERS