Exclusive: White House considers former banking lawyer for Fed board - sources

NEW YORK/WASHINGTON Wed Apr 23, 2014 6:06pm EDT

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

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NEW YORK/WASHINGTON (Reuters) - A former lawyer with the American Bankers Association is being considered by the White House as a possible nominee to the board of the Federal Reserve, according to sources familiar with the efforts

The lawyer's name emerged as the White House weighs candidates with community banking backgrounds to fill gaps on the Federal Reserve's powerful but depleted board, the sources said.

The U.S. central bank, which is looking to wind down its most aggressive economic stimulus ever, is operating with just four of its seven board positions filled. Two nominees await congressional confirmation to fill two of the current vacancies. With another governor set to retire in a month, there would still be two vacancies.

People familiar with the White House's process said administration officials may fill one of the remaining openings with someone with banking experience, as opposed to an economist.

Two sources said the administration is considering Diana Preston, a lawyer who recently left a post at the American Bankers Association, which represents many small banks.

A separate source familiar with the process said officials are looking at Rebeca Romero Rainey, who runs a small bank in New Mexico, and Ann Marie Mehlum, who headed an Oregon-based bank before joining a federal small-business agency last year.

The latter two were previously named as possible candidates by other news outlets. It was unclear whether the Obama administration was considering additional candidates besides those three or how close it was to making a decision.

Preston declined to comment in an email, referring questions about vetting to the White House. Romero Rainey and Mehlum did not return calls or emails.

The White House did not respond to requests for comment on the nominations process.

Community bank lobbyists and lawmakers from both political parties have pushed for a small-banks representative on the Fed board since Elizabeth Duke resigned in August.

Duke, who had worked for small banks and was a past chairman of the ABA, was seen as the board's voice for smaller banking firms and periodically spoke about the state of community banking.

"Nominating an individual with community banking or supervisory experience would ensure that future Federal Reserve actions and regulations are tailored and reflect a nuanced understanding of the regulatory and economic environment faced by community banks," Senator Heidi Heitkamp, a North Dakota Democrat, and 15 other senators wrote in a letter to President Barack Obama on April 10.

Community bank groups have had some success pushing for their priorities in Washington in recent years.

The smallest banks were exempt from many requirements under the 2010 Dodd-Frank rewrite of financial rules, and regulators tweaked part of the Volcker rule proprietary trading ban related to trust-preferred securities earlier this year after the ABA sued over the requirements.

Preston, Romero Rainey and Mehlum all have some experience that appears to fit the profile. Preston was a vice president at the ABA and deputy general counsel of its securities unit until she left on January 16.

Romero Rainey is chief executive of Centinel Bank in Taos, New Mexico, and is heavily involved with another community bank group. Mehlum, who led Summit Bank in Oregon for a decade, now runs a capital-access office at the U.S. Small Business Administration.

A spokesman for the small business agency referred questions about Mehlum to the White House.

(Reporting by Jonathan Spicer and Emily Stephenson; Editing by Tim Ahmann and Leslie Adler)

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