By William Branigin
Washington Post Staff Writer
Monday, October 24, 2005; 4:57 PM

President Bush today nominated his chief economic adviser, Ben S. Bernanke, to replace Alan Greenspan as chairman of the Federal Reserve when Greenspan's term expires Jan. 31.

Bernanke immediately pledged to continue the policies of Greenspan's tenure.

In making the announcement at the White House, Bush hailed Bernanke's "reputation for intellectual rigor and integrity" and said he "commands deep respect in the global financial community."

Bush said Bernanke, if confirmed by the Senate, "will replace a legend" in Greenspan, who he said has steadily "shepherded our economy through its highs and its lows" and "has dominated his age like no central banker in history."

In brief remarks after Bush's introduction, Bernanke said, "If I am confirmed by the Senate, I will do everything in my power, in collaboration with my Fed colleagues, to help to ensure the continued prosperity and stability of the American economy."

He said his first priority would be to "maintain continuity" with the policies and strategies of Greenspan's 18 years at the helm of the Federal Reserve.

Stocks surged after the announcement. By today's close, the Dow Jones Industrial Average was up nearly 158 points.

Bernanke, 51, a Republican, served as a member of the board of governors of the Federal Reserve System for three years before being named chairman of the President's Council of Economic Advisers in June. He previously was an economics professor at Princeton University and served as chairman of the university's economics department from 1996 to 2002.

Bernanke, who holds a doctorate in economics from the Massachusetts Institute of Technology, has a fiscal philosophy similar to that of Greenspan, who was named Fed chairman by President Ronald Reagan in 1987 and renominated for four-year terms by three other presidents. However, Bernanke and Greenspan differ on whether the Fed should set targets for inflation. Bernanke believes the Fed should set such targets, while Greenspan does not.

Flanked by Bernanke and Greenspan as he made the announcement in the Oval Office, Bush praised the "steady chairmanship" of Greenspan, who he said has "kept inflation low" during his stewardship of U.S. monetary policy.

"Ben Bernanke is the right man to build on the record Alan Greenspan has established," Bush said.

Greenspan, 79, who stood to the president's right during the ceremony, did not speak, and the three men left without taking any questions from reporters.

The outgoing Fed chairman later issued a statement praising Bush's "distinguished appointment." He said Bernanke "comes with superb academic credentials and important insights into the ways our economy functions," adding, "I have no doubt that he will be a credit to the nation as chairman of the Federal Reserve Board."

The nomination won plaudits from Republicans, but leading Democrats were more circumspect.

The chairman of the Senate Banking Committee, Sen. Richard Shelby (R- Ala.), said he was confident the nominee would be "well-received by all members of our committee." Senate Majority Leader Bill Frist (R-Tenn.) said Bernanke's guidance of monetary policy would "ensure a strong domestic economy and maintain America's global competitiveness."

Senate Minority Leader Harry Reid (D-Nev.), a Greenspan critic who once blasted the Fed chairman as "one of the biggest political hacks" in Washington, said in a statement that he wanted to "learn more about Mr. Bernanke's views on how the Federal Reserve should steer our economy free from political influence and interference."

Sen. John F. Kerry (D-Mass.), a member of the Senate Finance Committee, said Bernanke would inherit a financial situation marked by runaway spending, record deficits and "tax giveaways for the wealthiest Americans." The question, Kerry said, is whether Bernanke "will provide a voice of reason and responsibility in the face of so much fiscal mismanagement."

White House spokesman Scott McClellan said Bush conducted a "long exhaustive search" for a new Fed chairman beginning in late April. He said a committee that included Vice President Cheney and his embattled chief of staff, I. Lewis "Scooter" Libby, interviewed "several potential nominees" from an initial list of candidates that included more than 20 people. Bush formally offered Bernanke the nomination early this morning, McClellan said.

In introducing Bernanke, Bush said the Federal Reserve "is the symbol of the integrity and the reliability of our financial system." He said the institution "affects the lives and livelihoods of all Americans."

The Fed chairman "must be a person of impeccable credentials, sound policy judgment and character," Bush said.

He said Bernanke "has done path-breaking work in the field of monetary policy, taught advanced economics at some of our top universities and served with distinction on the Fed's Board of Governors."

Bernanke has "built a record of excellence as both an academic and policymaker," Bush said. "He is the author of several scholarly books and is one of the most cited economists in the world. As Fed governor, Ben advocated greater transparency in communication with the public and markets. His speeches were widely admired for their keen insight and clear, simple language."

Bush urged the Senate to "act promptly to confirm Ben Bernanke as the 14th chairman of the Federal Reserve."

Bernanke expressed appreciation for the presence of Greenspan, who he said has "set the standard for excellence in economic policymaking."

He added, "Our understanding of the best practice in monetary policy evolved during Alan Greenspan's tenure at the Fed, and it will continue to evolve in the future. However, if I am confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years."

Born in Augusta, Ga., Bernanke earned a bachelor's degree with top honors from Harvard University in 1975 and received a doctorate in economics from MIT in 1979. He is married and has two children.

In a statement on the nomination, former commerce secretary Don Evans, now chief executive of the Washington-based Financial Services Forum, said Bernanke "will bring certainty, wisdom, experience and sound judgment to this critically important position." He said members of the forum, which includes CEOs of 20 of the largest financial institutions in America, "look forward to Bernanke's stewardship and leadership in providing the nation with a safe, flexible and stable monetary system."