Third Fed term for Greenspan

RUPERT CORNWELL

Washington

President Clinton last night re-appointed Alan Greenspan to a third four- year term as chairman of the Federal Reserve, and nominated Alice Rivlin, the director of the White House budget office, to be deputy chairman at the US central bank.

The announcements came in a brief Oval Office ceremony, at which Mr Clinton also named Laurence Meyer, a St Louis economics professor, to fill the other vacancy on the US Fed's seven-member board. All three decisions are likely to be welcomed by Wall Street.

The choice of Ms Rivlin, former head of the non-partisan Congressional Budget Office and a senior fellow of the Brookings Institution, to succeed the Princeton economist Alan Blinder comes as something of a surprise, given that only a fortnight ago she was insisting that she was not interested in the job.

"I haven't lost my powers of persuasion," Mr Clinton joked in reply to a question about Ms Rivlin's change of heart.

Those powers became necessary after leaders of the Republican majority in Congress in effect vetoed Felix Rohatyn, the New York investment banker who was the President's first choice for the job - partly from partisan motives, partly out of concern over Mr Rohatyn's readiness to tolerate greater inflation to obtain faster economic growth.

Ms Rivlin is a deficit hawk, but her connections with a Democratic administration could still cause problems during confirmnation hearings before the Senate Banking Committee

By contrast, re-appointment of the 69-year-old Mr Greenspan was never in doubt. Mr Clinton did recently urge the Fed publicly to boost growth and lower interest rates, but he has always praised its chairman, a deft and politically astute figure who, although he is a Republican, enjoys strong bipartisan support.

President Clinton said of Mr Greenspan yesterday: "He has inspired confidence and with good reason. His decisions have helped us to work toward a period of sustained economic growth."

Economists predicted a favourable response in financial markets. They said Wall Street had hoped Mr Greenspan would be reappointed and would view the other candidates as highly qualified, mainstream economists. "Both of these nominees are solid, and the markets will take them in stride," said David Jones, chief economist at Aubrey G Lanston in New York