
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, April 21, 1994                   TAG: 9404210029
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

WATCH OUT, FED; CLINTON COULD CHANGE YOUR VOICE

For months, President Clinton has hailed low interest rates as welcome fruits of his economic policies. Now he must watch powerlessly as those rates creep higher and higher under prodding from the Federal Reserve.

This week, after months of stalling, Clinton will add a voice to the powerful seven-member central bank board, now made up entirely of appointees of Republican presidents Ronald Reagan and George Bush.

Much attention has focused on Clinton's search for a Supreme Court nominee. But in terms of daily life, his choices for two Fed vacancies could have more impact. The Fed alone has the power to create money - or make it disappear. And to change the cost of borrowing it.

The Fed's 1994 interest-rate increases - Monday's was the third since February - were meant to avert inflation. But they are reverberating through the economy in the form of higher rates for a variety of consumer and business loans, including cars, many credit cards and home mortgages.

Later this week, Clinton will name White House economist Alan S. Blinder to the Fed and designate him as vice chairman - an appointment that has been long expected.

That could put Blinder, who was a campaign adviser to Clinton, in line to succeed Alan Greenspan when Greenspan's term as chairman expires in August 1995.

A former Princeton economics professor and a member of the Council of Economic Advisers, Blinder is viewed as a big-picture economist - not so narrowly focused on fighting inflation as Greenspan and other members of the present Fed.

Blinder's grooming doesn't automatically mean he'll replace Greenspan, White House aides caution. Greenspan continues to enjoy an unusually cordial relationship with Clinton and might persuade the president he deserves a third term as chairman.

Clinton also must fill a second Fed vacancy, but the process got stalled when his first choice, economist George Perry of the Brookings Institution, turned it down after learning he wouldn't be designated vice chairman.

by CNB