Alan Blinder ’67 Headed for Fed Post

Princeton economist Alan S. Blinder ’67, who has been on leave since last year as a member of President Clinton’s Council of Economic Advisers, is headed for a new government post, as vice-chairman of the Federal Reserve Board.

Clinton nominated Blinder in April to fill the unexpired term of David W. Mullins, who had left the powerful position in February. On May 24th, the Senate Banking Committee approved Blinder’s nomination, and exactly one month later, the full Senate confirmed him by a voice vote.

As the new vice-chairman of the nation’s central bank, the forty-eight-year-old Blinder will play a major role in setting interest rates, which are key to regulating economic growth and inflation.

Blinder’s nomination and subsequent confirmation hearing before the Banking Committee drew unusual attention because of recent actions by the Fed, which to keep inflation in check has raised short-term interest rates four times this year. Many economists have praised the Fed’s anti-inflation vigilance, but others say the rate hikes threaten the nation’s economic recovery. Some conservative economists have depicted Blinder as “soft” on inflation, and they fear that he will be too willing to stimulate growth at the expense of price stability. But at his confirmation hearing on May 6th, Blinder apparently dispelled those concerns, for the committee approved his nomination by a vote of fifteen to none, with one abstention.

Professor Willian H. Branson, who in past years alternated with Blinder in lecturing in Economics 101, sees his colleague as being “pretty much in the mainstream in his concern about inflation.” For his part, Blinder thought the hearing “went pretty easily. You prepare for these things in great detail. I was ready for a lot of questions about bank regulation, but they asked very few.”

The Federal Reserve Board’s seven members, or governors, are appointed for fourteen-year terms. When Clinton approached Blinder about nominating him to a Fed post, he gave the economist a choice of filling either the vice-chairman’s unexpired term of two years or an opening for a full term. Blinder, who is the Gordon S. Rentschler ’07 Memorial Professor of Economics, chose the two-year term, in part because it expires on January 31, 1996, the same date that his leave from the university ends. “It’s very convenient,” he said.

Blinder added that he intends to return to the campus. Observers have noted, however, that Alan Greenspan’s term as chairman of the Fed will expire within a few months after Blinder’s, putting the Princeton economist in the logical, if unprecedented, position of succeeding him. In the Fed’s eighty-year history, no vice-chairman has ever become chairman.

This was originally published in the July 6, 1994, issue of PAW.