Fed vacancies clear path for Obama
Donald Kohn, who helped steer the Federal Reserve through the financial crisis, said he would retire as Fed vice chairman in June, giving President Barack Obama a chance to reshape the Fed by filling the resulting vacancy and two others on its seven-member board. The opportunity comes at a delicate moment. The Fed is under political attack for its failure to prevent the financial crisis and the way it helped bail out the banks, and it is confronting the task of deciding when and how to raise short-term interest rates and drain the extraordinary amount of credit it pumped into the economy. If Obama and the Senate move swiftly—and the White House press secretary, Robert Gibbs, said Monday that the president hopes to have a successor to Kohn confirmed by June—new Fed governors could influence the timing of the Fed's eventual move to raise interest rates. "It's almost inconceivable that the [policy-making Federal Open Market] Committee will become more hawkish," said Laurence Meyer, a former Fed governor. In Fed jargon, hawks are those more worried about inflation and more eager to raise rates. Adding three Obama appointees also could influence the stance that the Fed takes on issues beyond interest rates from the strength of consumer-protection rules to the size and powers of the nation's biggest financial institutions, provided Congress continues to give the Fed the task of regulating them.