How strong a Federal Reserve Board chairman will Alan Greenspan be? There are reasons to wonder. He has close ties to the traditional wing of the Republican party, especially with top Reagan administration officials, and this raises questions about his independence from the White House. And he has had run-ins with supply-siders. This raises doubts about whether he can control the Fed's seven-member board, which includes a majority of members in the supply-side camp. Mr. Greenspan's admirers predict confidently that he will overcome these concerns. Kathryn Eickhoff, an economist who was once second-in-command at Mr. Greenspan's consulting firm, says anyone fretting about his capacity to be his own man "does not know Alan Greenspan." Former Deputy Treasury Secretary Richard Darman says Mr. Greenspan -- who chaired a bipartisan commission on Social Security overhaul in 1983 -- is "a good consensus builder" who will work well with the board. Also in Mr. Greenspan's favor is the fact that Congress is inclined to give the Fed wide latitude, thanks to the inflation-fighting success of the retiring chairman, Paul Volcker. Mr. Greenspan appears anxious to protect that legacy. It's the Reserve Board itself that may prove most troublesome for Mr. Greenspan. The Reagan administration made life difficult for Mr. Volcker by packing the Fed with supply-siders, who see less inflationary threat from robust growth than economists generally, including Mr. Volcker. At one point the Fed's supply-siders nearly provoked him to resign, outvoting him to cut interest rates. And recently released minutes of a Fed policy-making meeting show that some of the supply-siders resisted Mr. Volcker's policy of nudging rates higher to defend the dollar. Some Volcker associates say his problems with the board contributed to his decision to leave. They believe he would have agreed to remain if President Reagan had exhorted him to put aside his personal preferences; this would have increased his clout inside and outside the Fed. The five board members appointed by Mr. Reagan "are much more individual and in a lot of ways much more unpredictable" than their predecessors, one Volcker associate says. "That makes the job of chairman more difficult and unattractive. So against that background, it was all the more important that he get a strong presidential appeal." Mr. Greenspan is unlikely to find the situation much easier. Norman Ture, a friend of Vice Chairman Manuel Johnson, the board's most influential supply-sider, observes that Messrs. Greenspan and Johnson "march to quite different drummers" on many economic issues. Another Johnson friend recalls that when the vice chairman served at the Treasury he "was very, very critical" of positions Mr. Greenspan -- then an outside Reagan adviser -- took in favor of tax increases and Social Security overhaul. On the other hand, some of the Reagan Fed appointees have privately voiced optimism that Mr. Greenspan's leadership will result in greater harmony because he, unlike Mr. Volcker, shares the Reagan majority's pro-deregulation views on banking issues. Moreover, says one source close to the Reagan board members: "Everyone on the board knows that while the president might not stand behind Volcker, he would have no choice but to stand behind Greenspan," who will be Mr. Reagan's most visible representative at the central bank. Mr. Greenspan has to keep enough distance from the White House to avoid compromising the Fed's independence. The administration clearly hopes that under his leadership the Fed will be less likely than it might have been under Mr. Volcker to drive up interest rates during next year's election campaign. But if Wall Street, leery of inflation, should begin to sense Mr. Greenspan caving in to White House pressure, the outcome -- as Mr. Greenspan himself surely knows -- could be a financial-market debacle not at all helpful to Republicans. Nevertheless, Mr. Greenspan will almost certainly maintain a much closer relationship than Mr. Volcker did with the president and other senior administration officials. He enjoys excellent relations with White House Chief of Staff Howard Baker and Treasury Secretary James Baker. He may even seek the sort of ties former Fed chairman Arthur Burns had with the Ford administration back in the mid-1970's, when Mr. Greenspan was chairman of the Council of Economic Advisers. The crusty Mr. Burns met often with top Ford administration officials and influenced the White House on important issues including fiscal policy. In a recent interview, Mr. Greenspan indicated he's well aware of the dangers of this kind of relationship. 'Burns was in no way compromising the independence of the Fed," he recalled. "Issues of monetary stimulus never came up; he would not have allowed them to come up, and we would never push him. One of the reasons he felt comfortable doing that is that I'm his old buddy; he was my professor at Columbia University, and he knew that the last person to get him to do anything inappropriate would be me. "It was not a model of political coordination," Mr. Greenspan continued. "Nor was it a model that would suggest that the Federal Reserve under Burns would take indirect instructions from the White House." Mr. Greenspan concluded: "You have no choice as a member of the Fed but to defend the institution. You have to. That's priority number one."
Opinions differ on how strong Alan Greenspan will be as Chairman of the Federal Reserve . He has close ties to the traditional wing of the Republican Party and is considered anti - supply - side . He has been called " a good consensus builder , " a skill needed to manage the majority supply - side Reserve board . He shares Reagan 's pro- business views on economic issues and has excellent relations with White House Chief of Staff Howard Dean and Treasury Secretary James Baker . However , he must keep enough distance from the White House to avoid compromising the Fed 's independence or drawing Congressional interference .