WASHINGTON - President Bush named top White House economic adviser Ben Bernanke as chairman of the Federal Reserve Board on Monday to succeed the near-legendary Alan Greenspan.
"The decisions of the Fed affects the lives and livelihood of all Americans," Bush said at the White House as Bernanke and Greenspan looked on. He said his choice "commands deep respect in the financial community."
It was the third time in as many years the president has turned to the 51-year-old Bernanke for a sensitive post. Bush named him to the Fed board in 2002, then made him chairman of the president's Council of Economic Advisers earlier this year.
The appointment is subject to Senate confirmation, and Bush called for swift action.
"If I am confirmed by the Senate I will do everything in my power, in collaboration with by Fed colleagues to help assure the continued prosperity and stability of the American economy," said Bernanke, a Harvard educated economist.
"My first priority will be to maintain continuing with the policy and policy strategies under the Greenspan era," Bernanke added.
Greenspan, who became chairman in 1987, completes his term as chairman on Jan. 31. By naming a successor more than three months in advance, Bush appeared to be trying to clear the path for a smooth transition.
Whatever the Senate's reaction, Wall Street liked what it heard. Stocks rose as word of Bernanke's appointment circulated in advance of the presidential announcement.
"Over the course of a career marked by great accomplishment, Ben has done path-breaking work in the field of monetary policy, taught advanced economics at some of our top universities, and served with distinction on the Fed's Board of Governors," Bush said.
Bernanke has "earned a reputation for intellectual rigor and integrity," Bush said. "He commands deep respect in the global financial community. And he will be an outstanding chairman of the Federal Reserve."
Bush praised Greenspan, as well. "For nearly two decades, Chairman Greenspan has shepherded our economy through its highs and its lows. Under his steady chairmanship, the United States economy has come through a stock market crash, financial crises, from Mexico to Asia, two recessions, corporate scandals, and shocks ranging from devastating natural disasters to a terrorist attack in the heart of America's financial center," he said.
Greenspan, who is serving his fifth chairman as chairman of the Federal Reserve Board and has been named to the post by presidents of both parties, did not speak. It was a rarity in Washington that signaled the imminent shift in power over delicate issues such as interest rates. For two decades, it was Greenspan's pronouncements, opaque and otherwise, that counted most within government and on Wall Street.
While Bernanke pledged continuity with his predecessor's policies, the two men differ on whether the Fed should set targets for inflation - Bernanke thinks it should, Greenspan does not. Otherwise they share a similar philosophy, so much so that while the younger man was at the Fed, market observers often looked at his speeches for insight into Greenspan's thinking.
Bernanke has a reputation as a straight-talking economist and a Republican who avoids telegraphing any ideology.
In June 2005, Bernanke was sworn in as chairman of the President's Council of Economic Advisers. He had served as a member of the board of governors of the Fed since August 2002,
A summa cum laude graduate of Harvard University in 1975, he received his doctorate from the Massachusetts Institute of Technology in 1979. During his years in Boston, he focused on the economic underpinnings of the Great Depression and the losing track record of the city's beloved baseball team, the Red Sox.
"Economics is a very difficult subject," Bernanke once said. "I've compared it to trying to learn how to repair a car when the engine is running."
Greenspan was 61 when he first took over the demanding job as Fed chairman.
His first government service was as chairman of the president's Council of Economic Advisers during the Ford administration. He had originally been tapped for that post by Richard Nixon, who resigned before Greenspan took office.
He joined the government after a long stint running Townsend-Greenspan, a New York consulting firm which had as its clients some of the country's top corporations.
It was during this period that he gained a reputation as an economist who loved to delve into the minutia of economic data, from monthly box car loadings to steel production data to try to determine the future direction of the economy.
He pursued his Fed job in the same way, often calling economists at other agencies to discuss the fine points of the government statistics. He would rise early every morning for a two-hour soak in his bathtub, time he used to devour the latest government statistics and Fed staff memos on the economy.
Greenspan succeeded another Fed legend, Paul Volcker, who during his eight years at the Fed had pushed interest rates up to their highest level since the Civil War in a successful effort to break a decade-long bout of inflation but also pushed the country into the deep 181-82 recession.
Greenspan never had to resort to pushing interest rates so high, mainly because during his tenure inflation never soared to the double-digit rates that Volcker confronted.
The economy did suffer two recessions during Greenspan's long tenure at the Fed, a 1990-91 downturn that occurred in part because of a huge spike in oil prices following Iraq's invasion of Kuwait, and a 2001 downturn that was worsened by the deadly terrorist attacks on the World Trade Center and the Pentagon.
It was under Greenspan that the central bank began in 1996 for the first time to announce on the day of its meeting whether it had made any changes to the short-term interest rates the Fed controls.
While technically Greenspan only had one vote on the 12-member Federal Open Market Committee, the Fed chairman was exceptionally adept at building consensus among the Fed board members and regional bank presidents who make up the panel that meets eight times a year to set interest rates.
He also demonstrated a keen mastery of Washington's political power games. His long tenure at the Fed was due in no small part to his ability to get along with whoever occupied the White House.
A lifelong conservative Republican, Greenspan was first selected as Fed chairman by Ronald Reagan in 1987. He was re-nominated by the senior George Bush, also a Republican, and won two more selections for four-year terms by Bill Clinton.