PENPIX-Who will Obama name to fill Fed vacancies?
Fri Mar 5, 2010 11:09am EST
Tue, Mar 2 2010WASHINGTON, March 5 (Reuters) - President Barack Obama is sifting through candidates for three vacant seats on the Federal Reserve Board, including the No. 2 spot that comes open when Vice Chairman Donald Kohn departs on June 23. For more, see: ID:nN02157252

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The White House on Tuesday said Obama will move quickly to fill the vacancies on the seven-person board.

The president's picks will be in position to influence when the Fed raises interest rates and how aggressively it takes on its post-financial-crisis regulatory responsibilities.

With November's mid-term elections a possible referendum on his administration, Obama may aim for a Fed that pushes hard to reduce unemployment and clamps down on risky financial practices. But he must avoid rattling markets with nominees seen as giving insufficient weight to preventing inflation.

Following are possible picks for the vice chairmanship and the other two open board seats.


Romer is currently chair of the White House Council of Economic Advisers. A University of California, Berkeley economics professor before joining the Obama administration, Romer has written about the Great Depression and about the impact of tax policy on economic growth. Some observers believe it unlikely that Romer would take a board seat, unless it was the vice chairmanship that Kohn is vacating. A nominee closely associated with the White House could face stiff Republican opposition. Asked on Friday whether she was interested in the job, Romer told Bloomberg TV: "I have to tell you, I really like the job that I have. I am certainly sticking where I am."


A current Fed governor, Tarullo was Obama's first appointee to the Fed's board and could be elevated to the vice chairmanship, leaving Obama with three board seats to fill. A lawyer with a background in bank regulation, Tarullo could satisfy pressures to make the Fed a tougher financial oversight agency. His close links to the administration may raise nervousness about his commitment to hold inflation at bay while unemployment rates remain high. He may prefer to focus on supervision issues rather than take on the No. 2 portfolio.


Now president of the San Francisco Federal Reserve Bank, Yellen chaired the White House Council of Economic Advisers in the Clinton administration. She is seen as a possible replacement for Kohn, although some Fed watchers believe she would be reluctant to return to Washington. Yellen was a Fed governor from 1994 to 1997. Her familiarity with the Fed system and how markets react to it is a plus; her reputation as an unemployment-emphasizing "dove" might weigh against her.


An economics professor at the Massachusetts of Technology, Diamond has written extensively on taxation and pension reform. He would add a consumer-focused voice to the Fed at a time lawmakers are debating whether to strip the central bank of its consumer protection role. His 2004 book, "Saving Social Security," was co-authored with Peter Orszag, now director of Obama's Office of Management and Budget. Reportedly contacted by the White House about a spot on the board, Diamond didn't respond to requests for comment from Reuters.


Madigan is the director of the Fed's Division of Monetary Affairs. A staffer at the Fed for close to 27 years, Madigan has followed a similar path to Kohn's, working his way through the Fed system to a job that puts him at the center of policy-making and forecasting. Carrying no political baggage, Madigan could be in position for a snag-free confirmation process.


Now director of the Congressional Budget Office and a former economist at both the Council of Economic Advisers and the Fed, Elmendorf would bring experience with fiscal issues alongside monetary policy exposure. His warnings about high costs were seen as dealing a major blow to Democratic health care reform proposals last year. That analysis could burnish his credentials as an independent thinker and boost his appeal across party lines.


An economics professor at Harvard University, Rogoff is a former chief economist for the International Monetary Fund who has written about financial crises, global imbalances and exchange rates. He ranked 24th in a list of most-cited economists, just behind Fed Chairman Ben Bernanke.


Goolsbee, a former University of Chicago economics professor, has been an Obama adviser since campaign days and is now a member of the Council of Economic Advisers. His nomination -- more likely for a seat on the Fed board rather than the vice chairmanship -- could emphasize Fed sensitivity to the concerns of Main Street, not just those of Wall Street.


A Columbia University professor who serves on a New York Fed monetary advisory panel and consults for other central banks. Considered a pre-eminent authority on monetary policy, he would be untainted by involvement with the recent crisis, but may be inexperienced in dealing with a skeptical Congress and public.


Williams is a top staff economist at the San Francisco Fed who worked for the Fed board from 1994 to 2002. In September, he presented a paper to the Brookings Institution that asked whether central banks should target inflation above 2 percent to avoid being handcuffed after pushing interest rates to near zero. ID:nWEQ001378


Fuhrer is the research director at the Boston Fed. He began his career at the Fed board, first as a research assistant and later as a senior economist. He has worked at the Boston Fed since 1992. In 1997, Fuhrer co-wrote a paper with Madigan on conducting monetary policy with interest rates at zero -- a paper that is at the top of Madigan's selected publications on his Federal Reserve profile page. A recent paper examined the concept of inflation persistence in macroeconomic theory.


Romer is a professor at the University of California, Berkeley and co-director of the monetary economics program at the National Bureau of Economic Research. He is member of the NBER Business Cycle Dating Committee, the arbiter of U.S. recessions. He is also Christina Romer's husband and the two frequently work together on papers and research projects. (Reporting by Mark Felsenthal and Kristina Cooke; editing by Editing by W Simon )