Alan Blinder Gets No. 2 Spot at Fed

President Clinton has approved the appointment of White House economist Alan Blinder to become vice chairman of the Federal Reserve Board, making him the leading candidate to succeed Chairman Alan Greenspan, according to senior Administration officials.

But the White House is still searching for another candidate to fill a second vacancy on the Fed’s seven-member board of governors.

Blinder’s appointment, which has not been officially announced, comes at a critical juncture in relations between the Administration and the Fed. In early February, the central bank raised interest rates for the first time in five years, sending shock waves through financial markets and the White House.

Now some analysts predict that the Fed is poised to raise rates again to forestall a resurgence of inflation, and the growing uncertainty about Greenspan’s plans is roiling the economy.

Fed officials have confused the issue further with contradictory public comments suggesting that there is no consensus within the central bank on which direction to take interest rate policy.

The two vacancies on the board give Clinton his first opportunity to appoint people who may share the Administration’s views on interest rates and monetary policy.

Blinder has been a key member of the Administration’s economic team since Clinton took office. The 48-year-old former Princeton University economist has been the No. 2 official on the Council of Economic Advisers and has been influential within the Administration on a broad range of issues.

Initially, Blinder turned down the appointment to the other vacancy on the Fed board, saying he planned to return to Princeton in the near future. That board seat came open in February when Wayne Angell, a Reagan Administration appointee, stepped down at the end of his term.

Blinder was more interested when David Mullins, a George Bush appointee and the Fed’s vice chairman, announced his early resignation Feb. 1. That slot is far more attractive, since whoever Clinton appoints as vice chairman will be considered the odds-on favorite to replace Greenspan when the chairman’s term expires in March, 1996.