Greenspan Awarded Third Term Senate Approves Federal Reserve Chairman’s Nomination

Castigated by some as a “human brake pad” on economic growth but more often defended as “a steady hand on the tiller,” Alan Greenspan was overwhelmingly confirmed by the Senate on Thursday to a third term as chairman of the Federal Reserve.

The 91-7 vote, extending the 70-year-old Republican economist’s term at the nation’s central bank by four more years, ended a procedural standoff that had held up his confirmation for three months.

A handful of liberal Democrats, led by Tom Harkin of Iowa, demanded - and were finally given - an opportunity for extended debate on what they say is the Fed’s misguided, too-tight monetary policy. Republicans had wanted to approve the nomination with little discussion, by unanimous consent.

Also confirmed were two other nominees to the seven-member Federal Reserve Board - White House budget director Alice Rivlin, to be its vice chairman, and St. Louis economist Laurence H. Meyer, to fill a vacancy on the board.

The Senate voted 98-0 for Meyer but only 57-41 for Rivlin. Republicans said they were angry at Rivlin for what they characterized as administration duplicity in proposing a budget with deep spending cuts while the White House was privately assuring the heads of many affected agencies that the cuts would not take effect.

“I do not believe we can have someone willing to subvert their judgment to political directives serving on the Federal Reserve Board,” said Sen. Christopher Bond, R-Mo.

But 11 Republicans sided with 46 Democrats, saving her nomination. Rivlin and Meyer, both Democrats, are considered by fellow economists to view the economy much as Greenspan and the other Republican holdovers on the Fed board, although they are perhaps slightly less inflation wary.

They’ll take their seats in time for the next meeting of Fed monetary policy-makers, July 2-3. Analysts are divided over whether the central bank will nudge short-term interest rates higher or leave them unchanged.

Greenspan’s critics contend the Fed could safely cut interest rates, spurring faster economic growth without increased inflation, because global competition is keeping a lid on both prices and wages.

“High interest rates are hidden taxes on those who are working today to educate their kids or buy a home,” Harkin said. “They are sucking the lifeblood out of our small businesses, our farmers, our working families.”

Greenspan and his colleagues, said Sen. Byron Dorgan, D-N.D, “view themselves as a set of human brake pads whose mission is to slow down the economy.”

Dorgan and Sen. Harry Reid, D-Nev., also attacked Greenspan’s management of the Federal Reserve, citing a General Accounting Office audit showing the Fed’s operating costs rose 50 percent between 1988 and 1994, more than twice the rate of inflation.

But Republicans and most Democrats defended Greenspan, who was first named to his position by Ronald Reagan in 1987. They credited him with sustaining the recovery from the 1990-91 recession into its sixth year and keeping the unemployment rate under 6 percent while holding inflation below 3 percent.

“He has kept a steady hand at the tiller instead of taking the politically expedient course of saying … ‘Let’s pump up the money supply,”’ said Banking Committee Chairman Alfonse D’Amato, R-N.Y.

Supporters also praised him for steering the financial system through the October 1987 stock market crash.

Sen. Daniel Patrick Moynihan, D-N.Y., called him “a national treasure” and Sen. Christopher Dodd, D-Conn., said defeating his nomination would be “a tragic mistake.”