Wall Street is already speculating on who will replace Alan Greenspan - if it's necessary.
The Federal Reserve chairman, hale and hearty after 12 years on the job, has given no indication he wants to retire. But his term as chairman expires in June 2000. (His term on the board runs until 2006.)
Though he's been praising Mr. Greenspan's performance on the job, President Clinton will not say whether he will reappoint Greenspan as chairman.
There's "a good case for the administration to leave the issue of Fed chairmanship unresolved in order to maintain pressure on Mr. Greenspan to pursue an accommodative monetary policy," writes David Hale, an economist with Zurich Financial Services, Chicago. He assumes Greenspan wants another term.
Clinton undoubtedly knows that tight Fed policies played a major role in his defeat of President Bush. In 1980, rapid inflation and an economic slump, brought on by Fed policy, denied President Carter a second term in office. Carter and Bush appointed the Fed chairmen responsible, Paul Volcker and Greenspan.
So the Fed is important. The central bank is sometimes termed the "fourth branch of government," notes Tom Schlesinger, executive director of Financial Markets Center, Philomont, Va.
Most economists figure Fed monetary policy has more to do with prosperity or recession in the United States, the globe's most powerful and influential economy, than either the White House or Congress.
They often say the chairman of the Fed has the most important economic-policy job in the world.
The chairman has one vote among 12 when Fed officials meet every five weeks or so to determine policy. But it takes some boldness for a member of the Federal Open Market Committee to oppose the position of the chairman, especially one with the reputation and experience of Greenspan.
Why it matters who's on the board
Nonetheless, the other voting members - six other governors, appointed by the president, and five of 12 Fed regional branch presidents, voting on a rotational basis - are not just ciphers.
Congress should devote "more attention" to the confirmation of presidential nominees of governors, says Mr. Schlesinger.
Elected politicians, he argues, should "closely examine the economic beliefs and prospective policies of nominees, erring on the side of a lot of scrutiny."
Clinton has named six governors so far, surpassing all other presidents except Franklin Roosevelt and Harry Truman.
Earlier this month the president announced his nomination of Roger Ferguson, already a board member, as vice chairman of the central bank, and Carol Parry, a former executive vice president with Chase Manhattan Corp., as a governor.
One unfilled slot remains.
The Senate Banking Committee plans hearings on these appointments after it returns from summer recess Sept. 8.
Analyzing the Fed's board, Schlesinger finds a strong tendency in the 1990s for its members not to fill out their 14-year terms. The average tenure of governors in office as of June was 27 months. In previous postwar presidencies, tenure ranged from 56 to 149 months.
Several governors have resigned to take more interesting or more lucrative jobs.
The study also notes that the boards appointed by Bush and Clinton probably represent the narrowest range of experience since the banker-dominated Fed of the 1910s and 1920s.
"Never in the central bank's history have professionally trained economists dominated the institution's leadership as they do today," Schlesinger says.
One advantage is that these economists know well the mechanics and controversies associated with monetary policy.
A drawback is that business, consumers, workers, the housing industry, and other groups are not directly represented.
Some liberal-leaning economists say the Fed is more interested in restraining inflation than with maintaining jobs.
"The Fed has always represented the bankers' point of view," says Jeffrey Faux, president of the Economic Policy Institute in Washington.
"It is hyper-concerned with inflation and the value of bonds," he says.
The debates among Fed policymakers are between those on the right and those in the center, holds James Galbraith, an economist at the University of Texas, Austin. No one speaks for the left.
There's also an in-house culture. Central bankers at the Fed and elsewhere believe they must be tough in policy decisions, willing to put many people out of work if needed to trim inflation.
This almost macho culture is particularly hard for women appointees, says Schlesinger.
If she is confirmed, he says, Ms. Parry "is going to face a lot of pressure on her to counter a perceived softness.
"I hope she won't succumb," he says.
(c) Copyright 1999. The Christian Science Publishing Society