Greenspan retirement rumors resurface

By George Hager
USA Today

Alan Greenspan will be 78 when his term as Fed chairman ends in two years. But he shows no signs of slowing down. Advertiser library photo

There's no hard evidence that the Federal Reserve chairman has plans to resign before his term expires in June 2004 — or before his tenure at the Fed ends on Jan. 31, 2006.

But speculation has grown that Greenspan could leave this year or next. Morgan Stanley investment seer Byron Wien forecast a 2002 Greenspan departure one of his 10 surprises for this year. The Blue Chip Economic survey just polled its panel of economists on Greenspan's likely successor. And Fed watchers note that the hint of an economic rebound and lull in Fed activity offer Greenspan a quiet time to leave — if he wants to. That has led several to spin scenarios that have him surprising everyone with an early exit.

Few would want him to go. Greenspan is the most respected central banker in the world, and financial markets here and around the globe would shudder at his departure, especially because there is no obvious replacement.

Rumors of Greenspan's imminent retirement have waxed and waned over the nearly 15 years he has been chairman, to no effect. He appears to love the job. For the record, a Fed spokes-person has no comment, but that's the usual response to rumors.

Frankly, barring an unforeseen health problem, most Fed watchers don't think the chairman will leave a minute before he has to.

But an early departure is not totally out of the question, for a number of reasons:

Politics. Greenspan's term as chairman ends in the middle of a presidential election year (2004), which would complicate any move by the Bush administration to name a successor. The Senate must confirm a Fed chairman, and Democrats could stall a Republican nominee to give a potential Democratic president a chance to name a Fed chairman in 2005. If Bush wants to name a successor — and if Greenspan is interested in leaving early — that points to a resignation in 2002 or 2003. Of course, Bush could simply reappoint Greenspan as chairman in 2004 — which most Fed watchers say is the likeliest outcome.

The recovery. If Greenspan did want to leave early, he'd probably want to go out with the economy rebounding. "My guess is he's got one mission left, and that's to get this recovery under way," said James Glassman, senior U.S. economist for J.P. Morgan. Most forecasters expect the economy to be back to health sometime later this year. "(Greenspan's departure) is going to happen in the next two years," Glassman said.

Fed rate-raising. If a solid recovery gets under way this year, the Fed almost surely will begin raising interest rates, which policy-makers pushed to 40-year lows last year. Would Greenspan want to leave his successor that onerous job? No, said Tom Gallagher, Fed watcher and a senior managing director for International Strategy & Investment. That argues for a Greenspan departure in 2003, after the bulk of the rate increases.

Time is running out. Green-span will most likely have to leave in less than four years. Fed governors get one full 14-year term in addition to whatever remains of the unexpired term of their predecessor. Greenspan served out Paul Volcker's term beginning in 1987 and began his own term Feb. 1, 1992. His time is up Jan. 31, 2006.

Age. Greenspan turns 76 next month (March 6). He'll be 78 when his chairman's term expires, and almost 80 when his Fed tenure runs out in early 2006.

"At some point Congress and the president will start to look like a corporate board falling down in its job of CEO succession planning" if they don't prepare for his departure, Gallagher said.

Yet Greenspan shows no sign of slowing down. He still plays tennis on weekends and golf in season. At a recent Senate Budget Committee hearing, he testified nonstop for most of three hours without the discreet breaks some other attendees were taking.

Except for what appeared to be an increased willingness to dismiss political questions, Greenspan's demeanor seemed unchanged, his sharpness undiminished.

"He really is at the top of his game," said economist James Annable. "...I would be extraordinarily surprised if he stepped down early."