WASHINGTON – In nominating Ben Bernanke as the next Federal Reserve Board chairman, President Bush turned to a candidate with unassailable credentials and enough distance from the White House to blunt charges of cronyism or ideological motivations, former White House officials and economists said Monday.
The president had considered nominees who may have left a deeper conservative stamp on the Fed. Conversely, he had the opportunity to bridge the partisan divide by nominating internal Fed candidates highly regarded by retiring Chairman Alan Greenspan who happened to be either Democratic or politically independent.
But the uproar that followed Bush’s nomination of White House counsel Harriet Miers to the Supreme Court limited Bush’s options, former White House economists said. The president could not antagonize his conservative base with a nominee far from the Republican camp, but he had to be careful not to inflame other opponents with a choice deemed too ideologically wedded to the White House. Above all, they said, Bush did not want another confirmation battle on his hands.
”I don’t think there’s any question that [the Miers fight] had a lot to do with” the Bernanke choice, said Bruce Bartlett, a conservative economic commentator. “It made them go with the safe appointment rather than take any risks.”
”This one does thread all those needles,” said Phillip Swagel, a former chief of staff at Bush’s Council of Economic Advisers.
If Miers’ defenders have dismissed her critics as elitists, they showed no reticence Monday in extolling Bernanke’s elite credentials. Bush boasted of Bernanke’s Harvard University record, his doctorate from the Massachusetts Institute of Technology and his chairmanship of the Princeton University Economics Department. In his nine-paragraph announcement, the president was almost dismissive of Bernanke’s White House experience, mentioning only in passing, “Since June he has served as chairman of the Council of Economic Advisers.”
When Bernanke joined the White House in June, his appointment as a top Bush economic advisor was seen as something of a tryout to succeed Greenspan at the Fed. But in recent months, strong competition had emerged.
Glenn Hubbard, a predecessor of Bernanke’s at the Council of Economic Advisers, had long been seen as a candidate for the Fed job, but as Bernanke’s star rose, so did the voices of Hubbard advocates, who saw him as a stronger conservative. Hubbard’s role as architect of Bush’s drive to all but eliminate taxes on dividends won him strong allies among supply-side economists, who view tax cuts as the surest path to economic growth.
Then in July, some White House officials began floating the name of Lawrence Lindsey, Bush’s first National Economic Council director and the driving force behind the president’s 2001 tax law, which cut taxes by $1.35 trillion over 10 years. Some conservative economists saw Lindsey as too ideologically brash and outspoken for the sensitive Fed post, but he had powerful advocates, especially National Economic Council director and old Bush friend Allan Hubbard.
In July, Marc Sumerlin, who worked with Lindsey at the White House and later joined Lindsey’s consulting firm, penned an opinion piece in The Wall Street Journal, warning against the naming of a Fed chairman who would adopt strict rules to determine when inflation is looming. The piece never mentioned Bernanke by name, but it was widely seen as a slam on Bernanke.
The conservative National Review published a piece on Aug. 11 warning of “the scary side of Ben Bernanke.”
If such sentiments pushed some in the White House toward Lindsey and Hubbard, others were suggesting a different tack. According to three former White House officials, senior voices at the Fed — including Greenspan — were encouraging Bush to look at Roger Ferguson, the Fed’s vice chairman, or Fed governor Donald Kohn.
Ferguson, a black Democrat, would ensure continuity in Fed monetary policy, while winning political chits that could be cashed during Supreme Court confirmation fights. Kohn, a political independent, would likewise sidestep a partisan battle.
Then came Miers’ Oct. 3 nomination. Angry conservatives denounced her as insufficiently committed to their cause, while politicians from both major political parties questioned the Supreme Court credentials of a nominee who had never served as a judge or worked as a lawyer on constitutional issues.
Former White House officials said conservative backlash wiped out whatever small chance Ferguson had. But it also knocked out Lindsey and Hubbard, who might be seen as too cozy with the president’s political agenda.
In the end, Bush turned to ”the John Roberts of the economic profession,” a conservative with a quick mind and unassailable credentials, said Cesar Conda, a former White House domestic policy aide.