Business as Usual : Other Nominees Seen as No Threat to Greenspan’s Fed

Alice M. Rivlin and Laurence H. Meyer would bring to the Federal Reserve Board the technical skills of first-rate economists and perhaps a slight tilt toward easier money.

But although both are Democrats, Fed watchers agree that they could not mount a serious liberal challenge to the tight-money policies of Alan Greenspan, the Fed’s Republican chairman, even if they were so inclined.

So it looks like mostly business as usual at the Fed even though President Clinton, who announced his Fed nominations Thursday, might welcome lower interest rates to stimulate business activity and help his reelection campaign.

Rivlin and Meyer have the professional stature and the personal self-confidence to stand up and be heard during internal debate over monetary policy. But when the votes are tallied, they are not expected to rock Greenspan’s boat.

“They will be supportive of Fed efforts to continue to bring inflation down,” said John Lipsky, chief economist at Salomon Bros.

The appointees have strong credentials. Rivlin, a Washington veteran, was the first director of the Congressional Budget Office 20 years ago and is perhaps the leading deficit hawk within the Clinton administration. She has described herself as a “fanatical, card-carrying middle-of-the-roader.”

Rivlin’s specialty is fiscal policy--federal spending and tax policies as well as state and local budgets--rather than monetary policy, the particular province of the Fed. She turned down a chance in 1993 to fill a Fed vacancy. But this time she accepted after the president said he needed her to replace Alan Blinder, who resigned as vice chairman to return to Princeton as a professor of economics.

Meyer, like Fed chairman Greenspan before him, has been successful in the consulting business, providing advice and selling economic models to business and government alike. He has proved a pretty fair forecaster, twice beating 50 other economists to win a national forecasting award for predicting unemployment, inflation and interest rates. He would fill the seat vacated by John LaWare, a former banker who resigned last year.

Neither Meyer nor Rivlin carries the political baggage that doomed Clinton’s first choice for vice chairman, financier Felix Rohatyn, who proclaimed that the Fed should loosen money and aim for economic growth of 3% a year, not the current target of 2.5%.

“The biggest thing they have going for them is that they’re not Felix Rohatyn,” said Daniel J. Mitchell, an economist at the conservative Heritage Foundation.

Rivlin and Meyer, although widely admired as economists, would probably have more difficulty challenging Greenspan over interest rates than Rohatyn would have had. The New York financier, a major Democratic fund-raiser, has easy access to the White House.

A man with a flair for publicity, Rohatyn also could have posed a competitive threat to Greenspan, a master of the news media and the Washington political scene. A knowledgeable Washington lobbyist said Greenspan was “happy to see the Rohatyn-nomination balloon run out of air” and may have helped puncture it in private discussions with members of Congress.

Some experts believe that certain Fed regional bank presidents currently carry more weight with Greenspan in policy debates than the current lineup of Fed governors. William J. McDonough, Jerry L. Jordan and Robert T. Parry--the presidents of the New York, Cleveland and San Francisco Fed banks, respectively--are especially influential, according to one Wall Street Fed watcher.

In pure voting strength, the Board of Governors has more clout, because all seven members have a vote on the Federal Open Market Committee--the Fed’s official policymaking body--although only five of the 12 regional bank chiefs are voting members at any one time.

However, all 12 bank presidents participate in the discussions, and given Greenspan’s genius at achieving consensus--most FOMC votes have been unanimous during his tenure--the actual voting strength is considered relatively unimportant.

For the Republican majority in Congress, the choice of Greenspan for another term was by far the most important part of the Fed nominations announced by the White House.

Keeping Greenspan at the helm is “a very positive and important signal about the economy, with a Fed committed to price stability,” said Sen. Connie Mack (R-Fla.), chairman of Congress’ Joint Economic Committee.

Mack predicted Greenspan’s reappointment makes Senate confirmation of Rivlin and Meyer likely. Wall Street should be happy too, said Dan Gillespie, who manages the municipal bond portfolio for GIT Investment funds.

Although Rivlin and Meyer may favor a slightly looser monetary policy, this is not likely to result in any significant shifts in the Fed’s determination to suppress inflation, Gillespie said.

“I don’t expect the chairman to have lost his justifiably dominant status,” said Kenneth Guenther, executive vice president of the Independent Bankers Assn. of America, emphasizing the dominance of Greenspan over Fed decision-making.

Meyer may be somewhat liberal on budget issues, but his monetary views “are not widely at odds” with Fed policies, said Martin Regalia, chief economist at the U.S. Chamber of Commerce. Regalia uses the economic model from Meyer’s firm to prepare the chamber’s own forecasts.

“Meyer’s skills are as good as anybody’s and better than many on the board,” Regalia said. “He rivals Greenspan himself on understanding how the economic data work.”

The only remaining question, Regalia said jokingly, is, “Why would a guy who has been so successful in business take a job like that?” The short answer: because it’s hard to say no when the president of the United States asks.

Earlier this month, Rivlin said she “couldn’t imagine” leaving OMB. On Thursday, the unimaginable seemed more likely.

Times staff writer Thomas S. Mulligan contributed to this report.

More Fed Coverage:

* Clinton nominates Greenspan. A1

* Fed chief praised for service. A1

* A look at the other nominees D4.

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Profiles: The New Feds

Alice Rivlin

* Age: 64

* Residence: Washington

* Education: Bachelor’s, Bryn Mawr College; doctorate, Radcliffe College

* Career highlights: Member of the staff at the Brookings Institution, 1957-66 and 1969-75. Director of economic studies at Brookings, 1983-87. Founding director of the Congressional Budget Office, which she headed from 1975 to 1983. Professor of public policy at George Mason University, 1992. Deputy director of Office of Management and Budget, 1993-94. Director of Office of Management and Budget, 1994 to present. Author of numerous publications, including “Caring for the Disabled Eldery: Who Will Pay?” and “Reviving the American Dream.”

Laurence H. Meyer

* Age: 51

* Residence: St. Louis

* Education: Bachelor’s in economics, Yale University; doctorate in economics, Massachusetts Institute of Technology

* Career Highlights: Assistant professor at Washington University, 1969-76. Economist at Federal Reserve Bank of New York, 1975-76. Associate professor at Washington University, 1976-82. Visiting scholar at Federal Reserve Bank of St. Louis, 1979-80. Chairman of economics department at Washington University, 1980-83. Professor at Washington University, 1982 to present. President of Laurence H. Meyer & Associates Ltd., 1982 to present. Has written numerous articles and a textbook on macroeconomic modeling and has testified before Congress on macroeconomic policy issues.

Sources: Laurence H. Meyer & Associates Ltd., Times reports, Who’s Who in America

Researched by JENNIFER OLDHAM / Los Angeles Times