By Nick Timiraos
San Francisco Fed President John Williams is the leading
candidate to become the next president of the Federal Reserve Bank
of New York, one of the most influential positions within the U.S.
central bank, according to people familiar with the matter.
Mr. Williams has been recommended by the New York Fed's board
for the position. If approved by the Washington-based Fed board of
governors, Mr. Williams would succeed William Dudley, who plans to
step down this summer.
The president of the New York Fed, one of 12 regional reserve
banks, has a permanent vote on the central bank's rate-setting
Federal Open Market Committee and serves as its vice chair. The
bank is a chief regulator of the some of the nation's largest banks
and serves as the Fed's window onto Wall Street.
Mr. Williams succeeded Janet Yellen as the San Francisco Fed
leader in 2011, after Ms. Yellen was tapped by President Barack
Obama to serve as the Fed's vice chairwoman. Mr. Williams
previously served as the San Francisco Fed's research director,
reporting to Ms. Yellen.
Mr. Williams, 55 years old, joined the San Francisco Fed in 2002
and previously served as a senior economist for the Fed board in
Washington. He joined the central bank in 1994 and has a Ph.D. in
economics from Stanford University.
Mr. Williams has advocated in favor of the Fed's current path of
gradually raising interest rates, voting with his colleagues last
week to lift their benchmark short-term rate by a quarter
percentage point.
"Based on where I see [the economy] going, it makes sense to
think about three or four rate increases in 2018," Mr. Williams
said to reporters in Los Angeles in late February.
No final decisions have been announced, and the situation could
always change, these people said.
The New York Fed president figures to serve as a top lieutenant
to Fed Chairman Jerome Powell, who started his term in
February.
Another top post, the Fed board's vice chairman, is vacant. The
Wall Street Journal previously reported that President Donald Trump
is likely to nominate Columbia University economist Richard Clarida
for Fed vice chairman. Mr. Williams was among several candidates
who interviewed for that job with the White House.
The members of the Fed board of governors, including the chair
and vice chair, are nominated by the U.S. president and subject to
Senate confirmation. The 12 Fed reserve bank presidents aren't.
Instead, the members of each reserve bank's board of directors who
don't represent private banks regulated by the Fed select the
leader of the bank, subject to approval by the Fed's board in
Washington.
The New York Fed began its search for a new president last fall
and by mid-March had winnowed its pool down to three finalists,
according to people familiar with the matter. The two other
shortlisted candidates are Raymond McGuire, the longtime head of
corporate and investment banking at Citigroup Inc., and Mary
Miller, a former top Treasury Department official, these people
said.
The New York Fed, and the central bank system as a whole, has
come under pressure from lawmakers and outside groups to recruit
more diverse candidates to fill its senior ranks, which are
predominantly white and male.
Last year, the Atlanta Fed became the first Fed reserve bank to
name an African American as its president when it selected Raphael
Bostic. Mr. McGuire is also African-American.
Meanwhile, just two of the 12 reserve banks have female
presidents: the Cleveland Fed's Loretta Mester and the Kansas City
Fed's Esther George.
The next president of the New York Fed will implement important
decisions over how the central bank should manage interest-rate
policy with a portfolio of bonds and other assets that is
significantly larger than before the financial crisis. The Fed last
year began shrinking its bond holdings.
Mr. Powell has served as the Fed board's point person overseeing
the selection of new presidents at reserve banks for the past
several years. He has been more involved in the New York Fed's
presidential search than other recent reserve bank executive
searches, according to people familiar with the matter.
Mr. Powell, who isn't an economist, has been especially keen on
having someone in the job with monetary-policy experience, these
people said, an emphasis that boosted Mr. Williams's candidacy.
Mr. McGuire, 61 years old, and Ms. Miller, 62, have extensive
private-sector backgrounds in finance but no experience conducting
monetary policy.
He has worked in investment banking since 1984 and became Citi's
sole head of global banking in 2009 after serving as co-head for
the prior four years. She spent 26 years at T. Rowe Price Group in
Baltimore, most recently running the asset-management company's
fixed-income division. Ms. Miller then served at the Treasury
Department from 2010 to 2014, most recently as undersecretary for
domestic finance.
Mr. Williams, in contrast, has an extensive record of economic
research on monetary-policy topics and has driven debate on some
issues.
For example, he had done leading work on identifying the neutral
rate of interest -- the inflation-adjusted rate that neither spurs
nor curbs growth. Understanding how to glean this unobservable rate
is important in setting Fed interest-rate policy. Mr. Williams has
argued, and many other officials have come to agree, that the
neutral rate fell very low during the financial crisis and
recession and hasn't recovered much since.
In recent months, Mr. Williams has revived calls for the Fed to
debate possible changes to its policy framework of targeting 2%
inflation. He has advocated for considering a price-level target,
in which the Fed would make up for periods of below-target
inflation by allowing inflation to run higher later during an
expansion to make up for the earlier shortfall.
The San Francisco Fed also has taken the lead in recent months
in taking a more aggressive tack in recommending structural changes
at Wells Fargo & Co., which has its headquarters in the San
Francisco Fed's district, after the eruption of a sales practices
scandal that resulted in potentially 3.5 million accounts opened
without customers' knowledge. The Fed announced an enforcement
action in February that limits the size of the third-largest U.S.
bank by assets, potentially crimping revenue and profit growth.
In an interview last year, Mr. Williams said the phony-account
scandal underscored "the importance of the soft side of
supervision, which is really about management, governance and
culture."
Mr. Dudley, whose term expires early next year, announced in
November that he planned to retire this summer. The New York Fed's
board directors who aren't from the banking industry were tasked
with selecting the new president, and the search committee was led
by two of those directors, Sara Horowitz and Glenn Hutchins.
The New York Fed hired two executive search firms to help find
Mr. Dudley's successor. One of those, Spencer Stuart, has been
involved in many Fed bank leadership searches, including the one
that resulted in Mr. Bostic's selection in March 2017. The other,
Bridge Partners, specializes in identifying candidates who are
women and minorities.
On March 16, the search committee said it had narrowed the list
"to a handful of final candidates, who we are pleased to say are
eminently qualified."
Ms. Miller and Mr. McGuire are both registered Democrats. Mr.
Williams is registered with no party affiliation.
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
March 24, 2018 12:07 ET (16:07 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.