What’s Behind the Greenspan Delay : Senator Aims to Bring Fed Into ‘Sunlight’

Alan Greenspan’s bid to serve another four years as chairman of the Federal Reserve Board was supposed to sail through the Senate faster than a hot tip on Wall Street.

He is, after all, a reassuring, professorial figure exalted in financial circles, a true-blue Republican endorsed by a Democratic White House and a field-tested general in the war against inflation.

That was more than three months ago. Since the beginning of March, the nation’s preeminent economic official--and his Clinton administration sponsors--have been stuck in an awkward and frustrating wait as a single Democratic senator from the Midwest has exercised his power to delay Greenspan’s confirmation.

If a busy Senate could muster more than two days last year to chew over the choice of a surgeon general, asserts Sen. Tom Harkin of Iowa, it ought to scrape up equal time to debate a man widely considered the second-most powerful in Washington.

“Here’s a guy who’s been consistently wrong, consistently wrong,” Harkin contended in an interview Wednesday. “Yet we’re to rubber-stamp someone like that and give him another four years as Fed chairman.”

While Harkin concedes that Greenspan’s confirmation is inevitable, the episode is more than a fleeting headache for the administration. It underscores the widespread public yearning for brisker economic growth, despite five years of an expanding economy.

It highlights the gap between the investment world of Wall Street, where Greenspan’s vigilance against inflation is widely admired, and the desire of average working Americans for wage hikes and job growth.

And it provides yet another instance of President Clinton positioning himself to the conservative side of Democrats on Capitol Hill.

Moreover, it is another in a series of jabs at the Fed, a mystique-shrouded institution that waits five years to release details of its closed-door meetings on interest rate policy. Congressional critics this week charged its Los Angeles branch with a pattern of faulty bookkeeping methods and previously accused the Fed of wasteful management practices.

“I hope to bring the Fed out from underneath the shadows and focus some sunlight on it,” Harkin said of his longer-term goals.

Clinton nominated Greenspan on Feb. 22 to a third four-year term as Fed chairman, at the same time nominating Alice M. Rivlin and Laurence H. Meyer to other vacancies on the board. Greenspan’s term as a Federal Reserve Board member lasts until 2006, and he is currently serving as temporary chairman.

A deal to move Greenspan’s nomination to the Senate floor remains bottled up and may not be resolved before next week. Even a personal call to Harkin from the president last month failed to break the logjam.

“The board should be filled and it should be filled in a timely manner,” a White House aide said Wednesday. “We think it’s in the public’s interest to have these outstanding people expeditiously moved through the confirmation process.”

The underlying issues of economic growth are serious business for Democrats and Republicans, especially with a presidential election looming.

Earlier this year, Clinton seemed to deliver an implied criticism of Greenspan when he called for a national debate on economic growth. The White House also put out word that it was considering Felix G. Rohatyn, a New York financier who has advocated brisker growth, to be vice chairman of the board.

Congressional Republicans rebelled at the mention of Rohatyn. The national debate on growth never took off and, within days, Clinton announced that he would submit Greenspan’s name for another term as chairman.

Harkin’s crusade for a debate on Fed policy finds a sympathetic audience among many congressional Democrats who believe that Greenspan has tilted too far against inflation--an emphasis dear to the hearts of bondholders and other Wall Street investors--at the expense of economic growth that would pay off in job creation and higher incomes for average workers.

The Iowa senator has several Senate allies, including Democrat Byron L. Dorgan of North Dakota, although it is Harkin alone who has pushed the issue.

“Arguably, the most important economic appointment of Clinton’s term goes to a lifelong Republican,” lamented a senior Democratic aide in Congress. “It was the safe thing to do, safe politically. You know what you’re getting. But what distinguishes it from the monetary policy of [Republican] George Bush? I find it somewhat disappointing.”

At the same time, concern over interest policies goes far beyond liberal Democratic circles. Many farmers, entrepreneurs, corporate executives and consumers would be delighted to see lower interest rates, although few of their Washington representatives care to make an issue out of Greenspan’s confirmation at this stage.

“We’ve said all along that we thought real rates are somewhat too high, and we continue to think that,” said Jerry J. Jasinowski, president of the National Assn. of Manufacturers. But he is quick to add: “We think that the chairman has done a good job and ought to be reconfirmed.”

Harkin believes the Fed’s tremendous influence on the national economy is enough to warrant a “healthy” debate on Greenspan’s policies, such as a series of interest rate hikes he supported in 1994, despite little sign of inflation. Compared with the sweeping effects of interest rates, run-of-the-mill budget decisions in Congress are “like spitting in the ocean” when it comes to influencing the economy, he said.

Harkin would also like the Fed to release the minutes of its key policy meetings much quicker, perhaps after just one year instead of the current five. “I’m laying the groundwork for some things,” he said. “I have some long-term plans.”

Greenspan, meanwhile, is described as taking the situation philosophically. “He considers it part of the confirmation process,” an aide said.