President Barack Obama’s likely nomination of three Federal Reserve governors will help Chairman Ben S. Bernanke plan an exit from record monetary stimulus and strengthen banking supervision and consumer protection.
Janet Yellen, an economist who heads the Fed Bank of San Francisco, is Obama’s choice for central bank vice chairman in Washington. The administration has also approached Sarah Bloom Raskin, Maryland’s commissioner of financial regulation, and Peter Diamond, an economics professor at the Massachusetts Institute of Technology, to fill two vacancies on the Board of Governors.
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The appointments would complete the Federal Reserve’s seven-member board for the first time since April 2006. Yellen, former chief economist under President Bill Clinton, and Diamond could help Bernanke determine when to raise interest rates from record lows, while Raskin brings expertise in regulatory issues.
“Does Bernanke need help in navigating the exit strategy? He sure does,” said former Fed Governor Lyle Gramley, senior economic adviser at Potomac Research Group in Washington. “The board has a lot of work to do in a variety of areas, even under normal circumstances.”
Yellen, 63, would replace Donald Kohn, who will retire at the end of his term in June after 40 years at the Fed. His departure would leave Bernanke, a former Princeton University professor, as the only economist on the board.
Fed governors are responsible for setting monetary policy as voting members of the Federal Open Market Committee, along with the president of the New York Fed. The other 11 Fed bank presidents rotate as voting members.
The FOMC, which next meets March 16, is likely to keep the benchmark interest rate unchanged until November, according to the median forecast in a Bloomberg News survey of economists this month. The central bank cut the main rate to a range of zero to 0.25 percent in December 2008.
The Fed has already wound down many of the emergency programs it set up to battle the financial crisis, and it plans to complete purchases of $1.25 trillion of mortgage-backed securities this month.
