Better Odds for Some Fed Chief Hopefuls?

A trio of Hoover Institution economists may be stronger contenders to succeed Alan Greenspan than Washington insiders realize

By Rich Miller

As the White House has stepped up its search for a successor to departing Federal Reserve Chairman Alan Greenspan next year, Administration officials haven't been shy about asking outsiders for advice. "Part of the process is to reach outside the White House and solicit opinions," President Bush told reporters on Oct. 4.

One outsider whose views are likely to carry considerable weight, people inside and outside the Administration agree, is George Shultz, now a distinguished fellow at the Hoover Institution think tank in California. The 84-year-old Shultz has served in a variety of government posts, including as Treasury Secretary and Secretary of State, and is a de facto eminence grise for the Republican Party.


  There are some important implications in Shultz's role in the search for a successor to Greenspan. A trio of Hoover economists -- Michael Boskin, John Taylor, and the less well-known John Cogan -- may have a stronger chance of nabbing the job at the Fed than is widely perceived by Washington pundits, insiders suggest. All of them are now Shultz's colleagues.

The real dark horse may be Cogan. His expertise is in budgetary, not monetary, economics, and he's not particularly well-known on Wall Street. But Cogan, 58, is close to Bush. He twice turned down offers to join the Administration as budget director but could find the offer of the Fed job more enticing.

The 67-year-old Taylor is the author of the Taylor rule, a mathematical equation that ties the Fed's interest rate moves to changes in unemployment and inflation. A well-respected monetary economist, he was once considered a leading candidate to take over at the Fed. But his star faded after he failed to impress Wall Street in the four years he spent as Treasury Undersecretary for International Affairs in Bush's first term.


  Boskin, 60, was chief White House economist during the term of the first President Bush and was a member of the President's economic-advisory team in the 2000 election campaign. He's close to Vice-President Dick Cheney, who Administration insiders say is playing a key role in the hunt for a Greenspan successor. In March, Cheney attended a lavish 60th birthday party that Boskin threw for his wife at the Asian Art Museum in California.

Some insiders say Boskin has never really hit it off with the younger Bush, however. Indeed, a few Bushies still grouse about Boskin's behavior in the closing days of the elder Bush's Presidency, complaining he seemed to be more concerned about the future of his own career than that of the Commander-in-Chief.

As the search for a Greenspan successor enters into the final weeks, speculation is swirling about whom Bush will nominate the post. Given Bush's proclivity to surprise the pundits -- and Shultz's behind-the-scenes role in the process -- the Hoover crowd may well stand a chance.

Miller is a senior writer in BusinessWeek's Washington bureau

Before it's here, it's on the Bloomberg Terminal.