JACKSON, Wyo. (AP) – Alan Greenspan, whose 18-year run at the Federal Reserve closes next year, expressed confidence his successor as chairman of the central bank can handle any economic challenge.

He also renewed a warning on Saturday about the sizzling housing market, saying home prices may fall, slowing consumer spending, a chief ingredient for the economy’s good health.

Greenspan’s remarks wrapped up a two-day conference, sponsored by the Federal Reserve Bank of Kansas City, on the “Greenspan Era.”

The 79-year-old Fed chief expects to step down in five months, giving President Bush time to consider potential nominees.

Looking ahead, Greenspan predicted the Fed “will almost surely face as many uncertainties over the next 18 years as it has over the past 18.”

Technology continues to bring rapid change and uncertainty to the marketplace, he said. The aging U.S. population and long-term federal budget deficits, if left unchecked, are concerns.

“Surely difficult challenges lie ahead for the Fed, some undoubtedly of our own making, and others that will be thrust on us by market or other forces,” Greenspan said.

Whatever may come, he said he had “little doubt that my successors, and theirs, will continue to sustain the leadership of the American financial system in an ever-widening global economy.”

The economic conference served as a goodbye salute to Greenspan.

“It was a toast, not a roast,” Laurence Meyer, a former Fed member who served with Greenspan, said in an interview.

“More than anything, the new chairman will need to be able to make decisions on the fly and exercise good judgment,” something for which Greenspan was hailed, Meyer said.

The housing market, not Fed succession, was on Greenspan’s mind Saturday.

“The housing boom will inevitably simmer down,” Greenspan said. “As part of that process, house turnover will decline from currently historic levels, while home price increases will slow and prices could even decrease.”

A day earlier, he cautioned the public against thinking the value of homes and other investments will only go higher. “History has not dealt kindly” with that kind of optimism, he said.

If house prices fell suddenly or if interest rates rose quickly, it could clobber homeowners and lenders.

Rising prices have helped make many people feel wealthier and thus more inclined to spend. Consumer spending accounts for roughly two-thirds of all economic activity.

Greenspan said people taking cash out of their homes through refinancing, selling or other financial arrangements will ease along with “some of the strength” in consumer spending. The estimates of how much consumer spending will ease differ widely, he said.

An end to the housing boom and a moderation in consumer spending, however, could have a silver lining, Greenspan said.

It could lead to a boost in the personal savings rate, now dismally low, and could curb the public’s insatiable appetite for foreign-made goods, helping to narrow the country’s trade deficit, he said.

The broadest measure of trade, called the current account deficit, reached a record $668 billion last year.

Looking back at his tenure, Greenspan said he would miss the lively debates on economic topics with his Fed colleagues.

Debates on the merits of central banks to use interest rates to prick perceived price bubbles in stocks, houses or other financial assets may intensify in the years ahead, he said.

“But, given our current state of knowledge, I find it difficult to envision central banks successfully targeting asset prices any time soon,” Greenspan said.

When Greenspan finished speaking, he received a standing ovation from the economists, central bankers, academics and other economic elite.

“It’s been a wonderful pleasure … I wish you all well,” the Fed chief said.

A message written by Greenspan’s legendary cigar-smoking predecessor, Paul Volcker, was read aloud. He said Greenspan had chalked up “quite a record” and told him, “There are still mountains to be climbed.”

Copy the Story Link