Federal Reserve Chairman Alan Greenspan passed the country’s financial torch on Jan. 31. Former Fed governor and chief economist to the White House Ben Bernanke will take over. In response to Bush’s nomination of Bernanke on Oct. 25, 2005, Greenspan told The Associated Press that the decision was a “distinguished appointment” and said that Bernanke would bring to the position “superb academic credentials and important insights into the way our economy functions.”

In his last day in office, Greenspan passed a short-term interest rate increase, up to 4.5 percent, successfully completing his final goal as Chairman. This last increase brought the market full circle from where it was in 2001, when terrorist attacks and corporate scandals caused lowered interests rates that lead to a housing boom and “cheap” money. By gradually raising the rates back to their normal level, Greenspan successfully put federal funds rates on the desired long-term pattern.

With Bernanke in office, Federal Reserve policy will shift away from the use of patterns. With tough new challenges like large federal budget deficits, high energy costs, low and middle income wages falling behind inflation and a competitive international market, Bernanke will no longer raise rates at a measured pace, but rather make the adjustments needed at the time they’re needed.

“He’s at the top [of his field] in analyzing financial markets and their interrelationship with the real economy,” said Robert Williams, Voehringer Professor of Economics at Guilford College. “He’s original and he’s way ahead of the textbook.”

Federal policy and the monetary market will remain steady as Bernanke takes over, but the financial market is susceptible to change due to investor behavior. The largest concern with Bernanke is his ability to control investors’ activities, an area in which Greenspan excelled. With his position, all eyes will be focused on his actions and opinions. Investors will react to even the smallest public comment.

“We don’t know how he’ll [Bernanke] deal with the public media attention,” Williams said. “If he goes out there and responds, he’ll shoot himself in the foot. Greenspan was great at dealing with that.”

Greenspan, age 79, plans to start a consulting firm in Washington, D.C.

“I know this institution will go on doing extraordinary things,” Greenspan said to The New York Times during his last lunch with the Fed. “I will look on from the sidelines and cheer.