The White House and the Federal Reserve on Tuesday moved to
bolster the central bank’s leadership ranks as it prepares to start raising
interest rates this year for the first time in nearly a decade. President Barack
Obama said he would nominate former community banker Allan Landon to
the Fed’s Board of Governors. Separately, the Fed board named staff
economist Thomas Laubach to the powerful role of director of its
monetary-affairs division, where he will become a close adviser to Chairwoman Janet
Yellen on interest-rate decisions in the months ahead.
Mr. Landon previously served as chairman and chief executive
of Bank of Hawaii Corp. He has also worked at First American Corp.
and Ernst & Young. Mr. Laubach, however, could have a greater influence on
Fed policy than Mr. Landon. In his new role, he will have a hand in many of the
preparations ahead of policy meetings and a voice in discussions over strategy.
He will also have a role in bolstering a monetary-affairs division that has
been stretched thin in recent years by attrition and a heavy workload. Mr.
Laubach succeeds William English, who said last year he would step down after
four years in the high-pressure job.
The seven-member Fed board has two vacancies. Three of the
governors, including Chairwoman Janet Yellen, are economists. One, Daniel
Tarullo, is a lawyer. The remaining governor, Jerome Powell, is a former
private-equity executive who holds a law degree.
The staffing shifts come as the Fed enters an important year
for monetary policy. Officials are forecasting solid economic growth this year,
and many investors expect them to begin raising interest rates from near zero
sometime in the middle of this year as the economy strengthens.
The Landon nomination will be subject to Senate
confirmation. Edward Yingling, a lawyer with Covington & Burling and former
CEO of the American Bankers Association, gave Mr. Landon “excellent” odds in
his confirmation process, in part because so many lawmakers support having a
community banker on the Fed board.
In 2005, Mr. Landon was removed from the board of the
Seattle Federal Home Loan Bank. The board said there was no wrongdoing but
cited “the appearance of impropriety” when the Bank of Hawaii and Washington
Federal redeemed $25.4 million of Seattle FHLB stock in October 2004. In
arguing for better representation on the Fed board, community bankers—a powerful
force in Washington—say large Wall Street firms have disproportionate influence
over the Fed, which regulates banks.
Sen. David Vitter (R., La.) introduced legislation in the
last Congress that would have required at least one of the Fed board governors
to be a person with “demonstrated primary experience working in or supervising
community banks” with total assets under $10 billion. The provision was revived
this week in legislation extending the government’s terrorism risk insurance
program, which the House is scheduled to vote on this week. Mr. Landon wouldn’t
necessarily qualify under those criteria since Bank of Hawaii has $14.5 billion
in assets as of the third quarter.
Ms. Yellen has publicly opposed the proposal, saying in July
that while she would welcome having a community banker on the board. Roberto
Perli, a partner at consulting firm Cornerstone Macro, said the Fed has often
had a governor on the board with regional or community bank experience.
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