It was hardly appropriate that the stock market should plunge the day that Mr Alan Greenspan was nominated for a fourth term as chairman of the Federal Reserve.

After all, he is the darling of Wall Street, which believes that it is largely thanks to the 73-year-old Fed chairman that the US economy next month should register its longest economic boom ever. But Mr Greenspan, who still plays tennis and enjoys Georgetown parties, would appreciate the irony.

Back in December 1996, Mr Greenspan caused shudders when he warned that the rising financial markets could be showing "irrational exuberance". But after the first dismay, the markets roared ahead with even more exuberance.

The Dow Jones index of bluechip industrial stocks then stood at 6,437. At the start of this week, it stood at a record of just short of 11,500, but as President Clinton was announcing Mr Greenspan's reappointment on Tuesday, the Dow suffered its biggest one-day decline since September 1998.

The market's fears about rising interest rates easily outweighed any relief that Mr Greenspan was going to stay in charge for another four years. As he stood in the Oval Office to hear the President praising his record, Mr Greenspan refused to comment on the stock market's behaviour. He has learned that even his most banal comments are scrutinised around the world for indications of future market movements. He is said to do his most serious thinking in the bath.

Mr Greenspan was clearly delighted to be staying on when his present term expires next June. The mental challenge of guiding the biggest economy in the world has been as addictive as eating peanuts for the man who played professional jazz in his youth.

"There's a certain really quite unimaginable intellectual interest that one gets from working in the context where you put broad theoretical and fairly complex conceptual issues to a test in the marketplace," he told the President this week. "It's like eating peanuts. You keep doing it, keep doing it and you never get tired because the future is ultimately unknowable."

Mr Greenspan learned about this the hard way. Just two months after being sworn in by president Reagan in 1987, Mr Greenspan was confronted by the "Black Monday" stock market crash of October 19th, when the Dow fell by 508 points, the biggest point drop recorded.

He kept his nerve, put together a crisis team and eased credit, thus averting further panic selling. Some years later, he steered the economy through a banking crisis.

But Republicans blamed him in 1992 for contributing to the defeat of president Bush by not taking sufficient steps to get the economy out of the post-Gulf War recession. This reluctance in turn helped lend credence to Mr Bill Clinton's election slogan: "It's the economy, stupid."

But that is now forgotten, with Mr George Bush jnr welcoming the Greenspan reappointment by President Clinton. "Chairman Greenspan's steady leadership is good for the country and good for our economy," Mr Bush said.

His rival for the Republican nomination, Senator John McCain, joked in a recent debate that not only would he reappoint Mr Greenspan, but that if he was to die in office, "I would prop him up, put dark glasses on him and keep him in place."

President Clinton, referring to Mr Greenspan's celebrity status, joked this week that: "I've been thinking of taking `Alan.com' public. Then we could pay off the national debt even before 2015," which is the White House date for its elimination.

There were indications, however, that President Clinton had been prepared to replace Mr Greenspan with a Democrat. This plan was dropped when his choice, the outgoing Treasury Secretary, Mr Robert Rubin - also given credit for the economic boom - showed no interest in the job.

In 1996, it was touch and go whether President Clinton would choose to reappoint Mr Greenspan for a third term. It was felt that he might prefer a Democrat to the conservative Republican whom president Nixon had chosen in 1974 to head his White House Council of Economic Advisers. But the reviving economy was one of Mr Clinton's strongest assets as he faced re-election and re-appointing Mr Greenspan sent out the right signal.

Observers wonder, however, if Mr Greenspan has made the right decision this week and whether he should not have got out while ahead.

The exuberance he once feared may be a memory if the Wall Street bubble really bursts.