Ben Bernanke, recently nominated to succeed Alan Greenspan as head of the Federal Reserve, has huge shoes to fill, but was a good choice to follow Greenspan, real estate industry figures said.

“I think he was a good choice and the markets think he was a good choice,” said Doug Duncan, chief economist for the Mortgage Bankers Association. “I think he represents a continuation of Chairman Greenspan’s policies in some important ways.”

Others agreed with Duncan’s evaluation. “Everybody’s confident about him because he is a student of Greenspan,” said Marcus Ortega, an economist with J.P. Turner.

Duncan said Bernanke and Greenspan share similar views on productivity and its importance and the continued potential for holding down inflation.

Greenspan, who headed the Fed for more than 18 years, reduced interest rates dramatically in 2001, an action said to have fueled the hot housing market. For the last year, Greenspan, and hence the Fed, has raised short-term rates by a quarter percentage point at each of its last 12 meetings.

Whether the Fed keeps this slow-but-sure pace of the short-term rate hike to battle inflation or stops its tightening early in the new chairman’s tenure will affect how much money many homeowners have to spend, and how much businesses can expand. Movement on short-term rates tends to impact long-term rates for mortgages.

Duncan said he believes Bernanke will follow Greenspan’s example and do whatever is necessary to keep inflation under control.

“The Fed will certainly raise rates another quarter, in December. It’s highly likely they will raise rates in January in Greenspan’s last meeting, and we believe there will be another raise if Bernanke is confirmed,” Duncan said. “At that time the Fed funds rate would be four and three-quarters by the March meeting next year, and we believe that’s where it’s going to stop,” the chief economist said.

“As far as housing, he (Bernanke) recently made a statement that he doesn’t think there’s a housing bubble,” Duncan said. “That was music to our ears. He’s exactly where we are: some local markets will see adjustment, but nationwide there’s not a bubble.”

National City Corp.’s chief economist said he believes Bernanke will keep things on an even keel for a while.

“He will do so, not because he is disinclined to action, but because the Federal Reserve will have accomplished the bulk of its mission of restoring interest rates to more normal conditions,” said Richard DeKaser, chief economist of National City Corp. in Cleveland.

DeKaser said Bernanke showed that he was “an activist, in the sense of not waiting for events to be thrust upon you, but trying to anticipate and, if you will, preempt them,” during his three years on the Fed’s Board of Governors. Bernanke’s original stint at the Fed started in 2002 and ended this June.

“Bernanke shares this characteristic with Greenspan, in the sense that they tend to look ahead to the future to see what likely events were brewing and take action,” the chief economist said.

During that time, Bernanke aggressively advocated cutting interest rates. DeKaser said this shows that Bernanke is aggressive, but not that he is disposed toward cutting rates. “I think the times forced a focus on promoting growth because the U.S. economy was weak and facing headwinds. But his cutting interest rates more reflected where we were in the economic cycle.”

Concurring with Duncan, DeKaser said he believes Bernanke believes there is more hype than reality to the housing bubble question. “I believe Ben Bernanke is more skeptical than most regarding the risks of overvaluation and falling home prices.”

The good news for the market is that the uncertainty of who would replace Former Chairman Greenspan has now been resolved, according to Joseph Falk, legislative chairman of the National Association of Mortgage Brokers.

“A strong competent candidate has been nominated and I believe the housing and finance markets will applaud his nomination and ultimate confirmation,” Falk said.

In his 18 years as Fed chief, Greenspan has been elevated to nearly godlike status, DeKaser noted. His colleagues agreed.

“The former chairman is legendary and will go down in U.S. history as one of the great Federal Reserve chairmen of all time. Filling those shoes for any nominee will be a great challenge. From what I’ve read, the new nominee is up to it,” Falk said.


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