US Federal Reserve Vice Chairman Donald Kohn’s decision to step down at the end of June gives US President Barack Obama a chance to put a bigger imprint on the central bank.
Kohn, the Fed’s second-highest ranking official, has played a major role in shaping the Fed’s strategy in fighting the worst financial and economic crises to hit the country since the Great Depression.
His departure will open up a third seat on the seven-member Federal Reserve board in Washington. Board members are picked by the president and must be confirmed by the Senate.
The president will have a delicate task before him. He will need to pick candidates who appeal to Democrats and aren’t objectionable to Republicans. All this in an election year, where many Americans are upset with Obama about Wall Street bailouts, high unemployment and rising home foreclosures.
Earlier this year, Democrats lost their filibuster-proof Senate majority in a Massachusetts special election, highlighting the challenges they have in connecting and selling their message to voters.
Against that political backdrop, Bernanke had to wage a bruising battle in the Senate to garner enough support to secure a second, four-year term. The 70-30 Senate vote in late January was the closest ever for the post.
In selecting new Fed members, Obama “needs to stand up to this populism’’ and not be afraid to pick people with the right economic and financial credentials even if they had worked on Wall Street or in the banking industry, said Anil Kashyap, professor of economics and finance at the University of Chicago’s Graduate School of Business.
The battle over Bernanke’s confirmation was seen as a test of central bank independence, a crucial element if the Fed is to carry out unpopular but economically essential policies.
Besides tapping Bernanke — first appointed by George W. Bush — for a second term, Obama picked Daniel Tarullo, a former Georgetown law professor, to serve on the Fed. The Fed’s other members — Kevin Warsh has Wall Street experience and Elizabeth Duke was a banker — were picked by Bush. There are two vacancies on the board.
Fed watchers suggest that Tarullo could be promoted to vice chairman, but he is said to want to concentrate on his role of being the Fed’s point person on overhauling the country’s financial structure.
Others mentioned include Obama’s top economist Christina Romer, chair of the White House’s Council of Economic Advisers, CEA member Austan Goolsbee and Janet Yellen, president of the Federal Reserve Bank of San Francisco. Or Obama could opt for Republican Greg Mankiw, economics professor at Harvard.
When the Fed was battling the early days of the housing, credit and financial crises, it managed to operate with two vacant seats.
Duke had to wait more than a year to be confirmed by the Senate, where Democrats were in no rush to clear her nomination.
Even if the Fed board were to have three vacancies, it wouldn’t be crippled and could continue to operate. Under such a circumstance, however, the law requires that the Fed board have a unanimous vote to approve any policy decision.
Potential candidates for the Fed openings might be discouraged by the intense scrutiny that comes with the vetting process as well as the likelihood of having to take a pay cut.
SLOW-MOVING STORM: The typhoon has started moving north, but at a very slow pace, adding uncertainty to the extent of its impact on the nation Work and classes have been canceled across the nation today because of Typhoon Krathon, with residents in the south advised to brace for winds that could reach force 17 on the Beaufort scale as the Central Weather Administration (CWA) forecast that the storm would make landfall there. Force 17 wind with speeds of 56.1 to 61.2 meters per second, the highest number on the Beaufort scale, rarely occur and could cause serious damage. Krathon could be the second typhoon to land in southwestern Taiwan, following typhoon Elsie in 1996, CWA records showed. As of 8pm yesterday, the typhoon’s center was 180km
TYPHOON DAY: Taitung, Pingtung, Tainan, Chiayi, Hualien and Kaohsiung canceled work and classes today. The storm is to start moving north this afternoon The outer rim of Typhoon Krathon made landfall in Taitung County and the Hengchun Peninsula (恆春半島) at about noon yesterday, the Central Weather Administration (CWA) said, adding that the eye of the storm was expected to hit land tomorrow. The CWA at 2:30pm yesterday issued a land alert for Krathon after issuing a sea alert on Sunday. It also expanded the scope of the sea alert to include waters north of Taiwan Strait, in addition to its south, from the Bashi Channel to the Pratas Islands (Dongsha Islands, 東沙群島). As of 6pm yesterday, the typhoon’s center was 160km south of
STILL DANGEROUS: The typhoon was expected to weaken, but it would still maintain its structure, with high winds and heavy rain, the weather agency said One person had died amid heavy winds and rain brought by Typhoon Krathon, while 70 were injured and two people were unaccounted for, the Central Emergency Operation Center said yesterday, while work and classes have been canceled nationwide today for the second day. The Hualien County Fire Department said that a man in his 70s had fallen to his death at about 11am on Tuesday while trimming a tree at his home in Shoufeng Township (壽豐). Meanwhile, the Yunlin County Fire Department received a report of a person falling into the sea at about 1pm on Tuesday, but had to suspend search-and-rescue
RULES BROKEN: The MAC warned Chinese not to say anything that would be harmful to the autonomous status of Taiwan or undermine its sovereignty A Chinese couple accused of disrupting a pro-democracy event in Taipei organized by Hong Kong residents has been deported, the National Immigration Agency said in a statement yesterday afternoon. A Chinese man, surnamed Yao (姚), and his wife were escorted by immigration officials to Taiwan Taoyuan International Airport, where they boarded a flight to China before noon yesterday, the agency said. The agency said that it had annulled the couple’s entry permits, citing alleged contraventions of the Regulations Governing the Approval of Entry of People of the Mainland Area into the Taiwan Area (大陸地區人民進入台灣地區許可辦法). The couple applied to visit a family member in
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