Calling him one of the most-cited economists in the world, Bush said Bernanke has an exceptional character and has done "path-breaking work in the field of monetary policy."
"He's earned a reputation for intellectual rigor and integrity. He commands deep respect in the global financial community. And he will be an outstanding chairman of the Federal Reserve," Bush said.
Speaking in the Oval Office flanked by Bernanke and Greenspan, Bush said Bernanke's credentials are impeccable and his reputation excellent. He also had high praise for the outgoing chairman.
"Ben will replace a legend, Alan Greenspan... For nearly two decades, Chairman Greenspan has shepherded our economy through its highs and lows ... He has dominated his age like no central banker in history. He has contributed a better life for all Americans. And I thank him for his service."
The president made note of the impact the Federal Reserve has across the world, calling it a "symbol of the integrity and the reliability of our financial system." He said Bernanke "is the right man to build on the record Alan Greenspan has established."
For his part, Bernanke said if confirmed by the Senate, his top goal will be to maintain continuity from Greenspan's tenure.
"I will do everything in my power, in collaboration with by Fed colleagues to help assure the continued prosperity and stability of the American economy," said Bernanke, a Harvard-educated economist.
"My first priority will be to maintain continuing with the policy and policy strategies under the Greenspan era," Bernanke added.
Responding to the announcement, Senate Minority Leader Harry Reid said he hoped Bernanke's objectives are free of politics.
"I look forward to the confirmation hearings to learn more about Mr. Bernanke's views on how the Federal Reserve should steer our economy free from political influence and interference," said Reid of Nevada. "It will be important that Mr. Bernanke demonstrate that he is committed to guiding the economy to produce results for all Americans rather than promoting partisan policies that benefit special interests and an elite few."
Sen. Chuck Schumer, who serves on the Senate Banking Committee that will receive the nomination, said he felt confident that Bernanke is a "careful, non-ideological person" who knows the Fed's job is to fight inflation.
"Chairman Bernanke's recent comments seeming to favor extending tax cuts without paying for them are troubling, but he assured me today that he was speaking only as the chairman of the President's Council of Economic Advisers," Schumer said after the president's announcement.
Bernanke, 51, served as a board member for the Fed between August 2002 and his nomination to head the president's economics team in April 2005. A former chairman of Princeton University's economics department, he was last seen with Bush in August at the president's ranch with several economic advisers.
The stock market appeared to like the news of Bernanke's nomination with the Dow Jones industrial average (search) rising nearly 100 points after the news hit and keeping its gains in the early afternoon after the announcement was made.
At the Fed, Bernanke had pushed for the central bank to be more specific in its inflation objectives. Greenspan has opposed setting a numerical target for inflation. The prospective nominee also has championed openness at the Fed — a policy that Greenspan has also advanced prominently.
"Economics is a very difficult subject," Bernanke once said. "I've compared it to trying to learn how to repair a car when the engine is running."
Despite the difficulty of the topic, Bernanke appears to have excelled at economics. A summa cum laude graduate of Harvard University in 1975, he received his doctorate from the Massachusetts Institute of Technology in 1979. While studying in Boston, he focused on the economic underpinnings of the Great Depression and the losing track record of the city's beloved baseball team, the Red Sox.
While differing on whether to set a target rate for inflation, Bernanke is considered an ideological partner to Greenspan, often being considered a second source into what Greenspan was thinking.
Greenspan, whose speeches have been known to affect the direction of the stock market in real time, was first appointed by Ronald Reagan (search) in August 1987 to fill an unexpired term. He had said previously he could stay on past the Jan. 31 expiration date of his latest term, but had indicated he would like to retire on time.
If confirmed, Bernanke will have big shoes to fill. Greenspan is considered exceptionally adept at building consensus among the Fed board members and regional bank presidents who make up the 12-member Federal Open Market Committee (search), the group that decides the cost and availability of money and credit in the economy.
The Federal Reserve Board is responsible for developing monetary policy in the United States. The FOMC's most obvious decision-making comes in the form of setting short-term interest rates that affect everything from credit card borrowing to mortgage rates to car loans.
The FOMC has announced 11 consecutive quarter point interest rate hikes since June 2004 in an attempt to stave off inflation coming primarily from energy price increases. The current prime rate is 3.75 percent, not nearly as high as the rate when Greenspan took over 18 years ago.
Greenspan's influence over the direction of monetary policy has led to healthy economic growth in the United States throughout his tenure. Only twice — in 1990-91 following Iraq's invasion of Kuwait, and in 2001 after the Sept. 11 terror attacks — has the country turned toward recession.
Greenspan has long been fascinated by economics and monetary policy, running his own company Townsend-Greenspan, which served some of the country's top corporations, and then as chairman of the president's Council of Economic Advisers during the Ford administration.
He had originally been tapped for that post by Richard Nixon, who resigned before Greenspan took office.
The Fed chairman has been known to wade into the deep waters of economic data, from monthly box car loadings to steel production data to try to determine the future direction of the economy.
He pursued his Fed job in the same way, often calling economists at other agencies to discuss the fine points of the government statistics. He would rise early every morning for a two-hour soak in his bathtub, time he used to devour the latest government statistics and Fed staff memos on the economy.
Greenspan succeeded another Fed legend, Paul Volcker (search), who during his eight years at the Fed had pushed interest rates up to their highest level since the Civil War in a successful effort to break a decade-long bout of inflation — but also pushed the country into the deep 1981-82 recession.
Greenspan never had to resort to pushing interest rates so high, mainly because during his tenure inflation never soared to the double-digit rates that Volcker confronted. One of Greenspan's biggest impacts to the market was, beginning in 1996, to announce on the day of the FOMC's meeting whether it had changed interest rates.
The Associated Press contributed to this report.