Wanted: Super-human technocrat to run New York Fed
NEW YORK (Reuters) - A creative technocrat, a good communicator and negotiator, a global mind-set, a person with gravitas.
The next president of the New York Federal Reserve will need these attributes to succeed in the $398,200-a year job, economists and money managers say, as he lands in the deep end of the worst financial crisis in 80 years.
As one former Fed economist put it: "With the challenges what they are -- you almost need two people."
The New York Fed, which even in calmer times is the most important of the regional Fed banks and the only one to have a permanent vote at the central bank's policy-setting meetings, has been vaulted into the public eye as the Federal Reserve's go-to crisis manager on Wall Street.
The bank's current president, Timothy Geithner, who has been nominated as the next Treasury secretary, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson have been a three-man band tackling a crisis that has led to the demise of Lehman Brothers, the bailout of American International Group, the fire-sale of Bear Stearns to JPMorgan Chase and the sale of Merrill Lynch to Bank of America.
"This is a critical position at a critical time for the country," Mohammed El-Erian, co-chief of powerful money manager Pacific Investment Management Co (PIMCO), told the Reuters Investment Outlook Summit last week.
"You need someone who understands the functioning of the Federal Reserve and you need someone who is close to the markets, who can speak the language of the market and is a known commodity within the markets," El Erian said.
"You need someone that is anchored by a solid analytical framework, because there are so many moving pieces right now. Without an appropriate anchor, the risk of whipsaw is high."
El-Erian said a there are number of people who would fit that description, including Bill Dudley, head of markets at the New York Fed, Terry Checki, the bank's head of emerging markets, Kevin Warsh, at the Fed's Board of Governors, and Paul McCully at PIMCO.
The New York Fed's board of directors, with the help of executive search firm Korn/Ferry International, is currently vetting potential candidates. Their choice will be subject to approval by the Board of Governors in Washington.
The New York Fed has been managing an alphabet soup of emergency liquidity programs. The bank's next president will have to be enough of a technocrat to understand the complexities of the existing facilities and creative enough to spearhead new ones, economists say.
"He'll have to strike a balance of trying to bolster markets without imposing so much structure that markets don't function well," said Dean Maki, co-chief U.S. economist at Barclays Capital in New York.
"The Fed is targeting asset prices -- and that is a tricky enterprise because once you're in that regime, it is up to the Fed to decide what the ideal spread is, which is risky."
Christopher Whalen, managing director at Institutional Risk Analytics, said the New York Fed's board should focus on "people with actual operational and financial skills that meet the needs of the public."
Whalen says candidates already working at the New York Fed, such as Checki or William Rutledge, head of Bank Supervision, or First Vice President Christine Cumming, would be among the most qualified. Brian Roseboro, former under secretary of the Treasury for domestic finance and now at JPMorgan Chase, would also have the "technical knowledge and market experience to understand the complex financial issues facing the U.S. economy." Continued...
