Fed minutes to shed light on member divisions

(Reuters) - Investors will get further insight on Tuesday into the U.S. central bank's controversial August 10 decision to buy more longer-term Treasury securities in the face of a weakening economy.

Minutes of the Fed's August 10 meeting will likely shed light on the vigorous debate that preceded the 9-1 vote for starting to use proceeds from maturing mortgage securities in its portfolio to buy Treasury notes.

The policy shift was aimed at preventing monetary conditions from slowly tightening over time as assets the Fed bought to fight the crisis rolled off its balance sheet.

A number of policymakers had reservations about the move, questioning whether recent economic weakness was merely a temporary soft-patch. Others worried it would send a signal to markets that more aggressive easing was imminent.

The minutes will be released on Tuesday at 2 p.m. (1800 GMT). The meeting was the final policy-setting session for Fed Vice Chairman Donald Kohn, who is retiring this week.

Kohn's expected successor, Janet Yellen, as well as two other nominees to fill long-running vacancies on the Board, are awaiting Senate approval.

Following is a brief description of the policy views of this year's voters on the Federal Open Market Committee, the central bank's policy panel.

PERMANENT VOTERS ON FOMC

All members of the Fed's Washington-based Board of Governors and the head of the New York Federal Reserve Bank have permanent votes on the FOMC.

* Fed Chairman Ben Bernanke (Dovish Centrist)

Bernanke stands in the middle of the hawk-dove scale, according to analysts. He led the Fed's aggressive campaign of interest rate cuts, which has taken overnight borrowing costs close to zero, and spearheaded the drive to flood the financial system with cash.

His academic focus on the Great Depression makes him particularly attuned to deflation risks, lending a dovish bent to his macroeconomic views.

"The committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly," Bernanke told a Fed conference in Jackson Hole, Wyoming, on Friday.

"At this juncture, the committee has not agreed on specific criteria or triggers for further action," he said.

* Fed Governor Kevin Warsh (Hawkish Centrist)

Warsh had been closely linked to centrist views on risks to the recovery but last fall showed some hawkish feathers by suggesting the Fed may have to tighten policy aggressively before clear signs emerge of an entrenched economic upturn.

Those sentiments were in evidence again in remarks Warsh delivered in June.

"Any judgment to expand the balance sheet further should be subject to strict scrutiny," he said on June 28.

"I would want to be convinced that the incremental macroeconomic benefits outweighed any costs owing to erosion of market functioning, perceptions of monetizing indebtedness, crowding-out of private buyers, or loss of central bank credibility."

* Fed Governor Elizabeth Duke (unclear policy bent)

Duke spent most of her career as a community banker, a background that informs her approach to policy.

In public remarks, she tends to focus much more closely on regulatory issues and consumer protection than on the broader economy, making her monetary leanings somewhat of a question mark, although the Wall Street Journal reported that she expressed reservations on the Fed's latest policy shift at the August 10 meeting.

* Fed Governor Daniel Tarullo (Dovish Centrist)

A finance lawyer by training, Tarullo is in charge of the Fed's bank supervisory function. To date the only board member appointed by President Barack Obama, he was the architect of the Fed's push to regulate executive compensation and generally favors forcing big banks to build larger capital cushions.

"The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon," Tarullo said on April 8.

* New York Fed President William Dudley (Dove)

Dudley, a former Goldman Sachs Group chief economist, has a dovish slant. He previously headed the New York Fed's markets group and played a leading role in creating crisis-fighting tools.

"The road to recovery is turning out to be a bit bumpy as relatively weak consumer spending and the ongoing problems in financial markets are keeping growth far less robust than we would like," he said on July 22.

REGIONAL BANK PRESIDENTS WITH A VOTE IN 2010

* Boston Fed President Eric Rosengren (Dove)

Rosengren, from a Boston area that is heavy with investment management and finance firms, tends to favor a looser policy stance.

"There are several policy options if we think the economy is weaker than we would like," he told the Wall Street Journal on July 13.

* Kansas City Fed President Thomas Hoenig (Hawk)

Hoenig, an Iowa State University Ph.D. who has worked for the Kansas City Fed since 1973, is a noted hawk who also falls in the camp of the so-called "freshwater" economists from the U.S. heartland who believe the central bank should take a hands-off approach to both the economy and financial markets.

Hoenig has used all five of his votes in 2010 to dissent against maintaining the Fed's pledge to hold rates "exceptionally low" for "an extended period," arguing rock bottom rates could set the stage for another dangerous boom-and-bust cycle.

"I believe that zero rates during a period of modest growth are a dangerous gamble," he said on August 13.

In his dissent on August 10, Hoenig also made clear that he did not believe reinvesting the proceeds from the maturing mortgage securities was necessary.

* Cleveland Fed President Sandra Pianalto (Centrist)

Analysts view Pianalto as a policy centrist, though recent comments have sounded "dovish" given a weak labor market and continuing financial strains.

"Our journey out of this deep recession will be a slow one," Pianalto said on May 18. "In my view, this outlook warrants exceptionally low levels of the federal funds rate for an extended period of time."

* St. Louis Fed President James Bullard (Dove)

James Bullard was assumed to be an anti-inflation hawk when he took the helm of the St. Louis Fed in April 2008, but on July 29 he warned that the United States could fall into a Japan-style quagmire of falling prices.

On August 19, he said further Treasury purchases may be needed,

"Should economic developments suggest increased disinflation risk, purchases of Treasury securities in excess of those required to keep the size of the balance sheet constant may be warranted," he said.