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Greenspan Confirmed to 3rd Term as Fed Chief

Economy: The Senate vote is followed by separate approval of Alice M. Rivlin and Laurence Meyer to serve on the board of governors.

June 21, 1996|JONATHAN PETERSON | TIMES STAFF WRITER

WASHINGTON — The Senate handily confirmed Alan Greenspan on Thursday to a third term as chairman of the Federal Reserve Board, dismissing the pleas of critics who had blocked action for almost four months.

The 91-7 vote for Greenspan was followed by separate approval of two mainstream economists to serve on the Federal Reserve board of governors--Alice M. Rivlin, director of the White House Office of Management and Budget, and Laurence Meyer, an economic forecaster from St. Louis.

Analysts do not expect the two newcomers to alter the Fed's anti-inflationary tilt or to mount a major, ideological challenge to Greenspan, who frequently cites "price stability" as the Fed's chief goal. The board's policy committee next meets in early July, amid rising questions about whether it will hike interest rates to slow the surprisingly brisk U.S. economy.

"One gets measured by results, and the results fundamentally are good," Donald Ratajczak, an economic forecaster at Georgia State University, said in explaining the widespread support for Greenspan's confirmation.

Senate members praised the 70-year-old lifelong Republican on Thursday for keeping a "steady hand on the tiller" in a job that is often described as the second most powerful in Washington.

"Throughout his tenure, even during turbulent times, he has remained constant and true . . . to the well-being and economic growth of this country," declared Senate Banking, Housing and Urban Affairs Committee Chairman Alfonse M. D'Amato (R-N.Y.).

The vote concludes a frustrating episode for the White House--and the nominees--whose names were first offered by President Clinton on Feb. 22. Since then, a small faction of Democrats, led by Sen. Tom Harkin of Iowa, managed to hold off the confirmation until GOP leaders consented to a debate over Greenspan's policies.

In that debate, which rambled for parts of three days, critics accused the Federal Reserve of being too quick to raise interest rates at the first hint of inflation, a strategy that delights Wall Street but--others argue--has restricted growth in jobs and incomes.

"Under the Greenspan Fed, job growth and the living standards of average Americans have been sacrificed on the altar of high interest rates and slow-growth policies," Harkin said before the vote. "Our economy has been held in a harness while Chairman Greenspan tilts at the windmill of inflation. And middle-class Americans have paid the price."

Such comments reflected a minority view even among Democrats, however. By contrast, the Senate chamber divided along partisan lines when it came to endorsing Rivlin, who has served as an administration emissary to Capitol Hill on controversial budget issues. Clinton's budget proposals have provoked many Republicans who believe that the White House has painted a rosy picture of deficit savings, while successfully pummeling the GOP in the public relations battle.

Rivlin has been "unwilling to answer questions about the president's budget honestly and forthrightly," said Sen. Christopher S. Bond (R-Mo.).

Sen. Majority Leader Trent Lott (R-Miss.) agreed that "there is a strong feeling that she has not been totally forthcoming with us on budget information."

Nonetheless, Rivlin, known as one of the administration's most fiscally conservative advisors, won confirmation by a vote of 57 to 41 to serve as vice chairwoman of the Fed's board of governors. All of the votes against her came from Republicans, while 11 Republicans voted for her confirmation.

By comparison, Meyer sailed through on a vote of 98-0. He is a highly regarded economist with deep awareness of national policy--his firm has done work for the White House Council of Economic Advisors, the Labor Department and even the Fed.

Rivlin will serve a full, 14-year term. She replaces economist Alan Blinder, who returned to the faculty of Princeton University earlier this year. Meyer was appointed to fill a partly completed term, which expires in January 2002.

Thursday's confirmations also represented something of a triumph for Lott, the new majority leader who has made it a personal goal to clear up a host of highly visible issues that have bogged down his chamber for weeks. The thorny issues, which frustrated his predecessor, Sen. Bob Dole (R-Kan.), have included the Fed nominations, the minimum wage, small-business tax relief, the gas tax and health insurance.

Clearly interested in getting on with the slow-moving agenda, Lott told reporters before the vote: "They've insisted on hours of debate [on Greenspan] . . . and we have allowed the time now, and we're going to get a vote, and we'll move on."

The keen interest in the Fed nominations reflects the central bank's tremendous influence over the U.S. economy through its power to move interest rates--which affect everyone from consumers seeking credit to buy a washing machine to corporate executives who plan billion-dollar investments.

If anything, the central bank has become even more influential in recent years, because the federal budget deficit has rendered the government's other basic tool for expanding the economy--spending--largely off-limits.

Thursday's votes mean that the Fed's seven-member board of governors and its policy-setting Open Market Committee will now have a full complement of officials for the first time since April 1995.

In addition to complaints about interest-rate policies, a handful of congressional critics have also said that the Fed is too secretive and that the Federal Reserve system is managed in a sloppy manner. But despite the opposition of Harkin and such allies as Sens. Byron L. Dorgan (D-N.D.) and Harry Reid (D-Nev.), Greenspan on Thursday was the recipient of lavish, bipartisan praise.

"A national treasure" is how Sen. Daniel Patrick Moynihan (D-N.Y.) described the bespectacled and soft-spoken chairman.

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