FT - Empty Fed Seats May Be Taken By Businessmen

Friday, November 18, 2005

UPDATED ON JANUARY 27: This is an older post. Click here for today's post on the nomination of Warsh and Kroszner (with pictures.)

The Financial Times has a story that the White House is looking beyond the academic circle to fill the two empty seats on the Federal Reserve Board that were vacated by chairman designate Ben Bernanke and retired governor Ed Gramlich. Oddly enough the story mentions only Pimco's portfolio manager Paul McCulley and Morgan Stanley lawyer Kevin Warsh as contestants from the business world and lists a string of economists instead.
From the Financial Times:
After nominating Ben Bernanke as the next chairman of the Federal Reserve, the White House has broadened its search beyond academic economists to fill the two empty seats on the Fed's board of governors.
Mr. Bernanke, a monetary economist, had a long and distinguished academic career before he joined the Fed as a governor in 2002, and the White House in June as chairman of the White House Council of Economic Advisers. One of the questions raised about his nomination has been a lack of private-sector and financial market experience, in contrast to his predecessors as Fed chairman, Alan Greenspan and before him Paul Volcker.
The White House is considering appointing business leaders, financial markets participants or experts in regulation to the board, according to two people familiar with the administration's deliberations.
"It does not mean they will not end up picking two academic economists but they feel (they) have the flexibility to look more broadly," one of the people said.
Candidates for the vacancies include Kevin Warsh, a member of the National Economic Council, a lawyer who previously worked in Morgan Stanley's investment banking department. Paul McCulley, a Fed-watcher and portfolio manager at Pimco, the fixed-income investment manager, is said to be one of a number of names put forward by Mr. Bernanke as chairman of the White House Council.
Among the academic economists under consideration, Richard Clarida, a professor at Columbia University, was a Treasury official in President George W. Bush's first term and is now a consultant to Clinton Group, the hedge fund. Randall Kroszner, a professor at the University of Chicago's graduate school of business, is an expert on banking, international finance and financial regulation and served on the Council of Economic Advisers during Mr Bush's first term.
The White House declined to comment on candidates or the timing of the nominations. There are currently no academic economists on the board.
Clarida, Kroszner and Warsh were already mentioned in a Reuters story seen in the New York Times last week. Readers of this blog know about it since November 10.


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