The Economist cover story this week is about Alan Greenspan, A hard act to follow. The leaders notes that although President Bush said last week he's looking for a successor to Mr Greenspan who would be seen as politically independent and who would thus inspire global confidence:
...the leading candidates have all advised or worked for Mr Bush. Mr Greenspan, of course, also has close Republican ties, but financial markets will be less forgiving of his replacement. Any suspicion that Mr Bush has selected someone simply because he is a loyal Republican would undermine confidence in the next chairman, even before he takes office.
Their choice of Donald Kohn as Greenspan's replacement may surprise some readers, but their argument is a reasonable one:
If Mr Bush means what he says about the next chairman being politically independent, then we believe the best choice would be Don Kohn, a governor on the Federal Reserve Board, who is not affiliated to any party. Mr Kohn has another big advantage. As a staff member before being promoted to governor in 2002 on Mr Greenspan's recommendation, Mr Kohn has been attending the Fed's policy-making meetings for almost 24 years, even longer than Mr Greenspan.
His vast experience of monetary-policy decisions and financial crises would be invaluable in troubled times. He is highly regarded by economists in the Fed and on Wall Street, and having worked with Mr Greenspan for so long, his thinking on interest-rate policy and financial markets is also close to the chairman's. He would offer continuity and a safe pair of hands.
Of course it would go quite against the grain for President Bush to appoint someone with as much experience, integrity and independence as Don Kohn. Mark Thoma recently pointed to a Bloomberg story on Governor Kohn as the Next Fed Chair? and commented:
I'm a stronger advocate of inflation targeting than Kohn, but I would not oppose him and a Greenspan clone with his experience would not be likely to upset financial markets.
An accompanying Economist article, Who will succeed Mr Greenspan? (subscribers only) discusses "the main candidates commonly touted" as Greenspan's replacement. They argue that each "has serious drawbacks".