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Kroszner under consideration for Fed job

July 5, 2005

By Tim Ahmann and Caren Bohan

WASHINGTON (Reuters) – The White House is consideringformer Bush administration official Randall Kroszner for avacant seat on the Federal Reserve’s Board of Governors,sources close to the administration said on Tuesday.

The Financial Times reported that Kroszner met senior WhiteHouse officials last week to discuss the job.

Kroszner, an economist on the faculty of the University ofChicago’s Graduate School of Business, served on the WhiteHouse Council of Economic Advisers from November 2001 untilJuly 2003.

International finance and financial regulatory issues areamong his areas of expertise.

The Fed’s seven-member Board of Governors is down oneperson after the departure last month of Ben Bernanke, who leftto become chairman of the White House Council of EconomicAdvisers. Another vacancy will open up in August when FedGovernor Edward Gramlich plans to step down.

The Board of Governors is at the core of the interest-ratesetting Federal Open Market Committee.

Kroszner, 43, has been a research consultant for theFederal Reserve Bank of Chicago since 1994 and has also donework as a visiting scholar at the Fed board.

The White House declined to comment on whether he was acandidate and Kroszner could not immediately be reached.

Kroszner is a believer in free markets whose views comportwell with the generally conservative “Chicago school” ofeconomics. Economists familiar with his work say he is a solidacademic and not an ideologue.

While his monetary policy views are not well-known,economists said he would likely be in the mainstream. OneUniversity of Chicago colleague said Kroszner would be a “soundmoney guy.”

In 2001, Kroszner wrote an article for a Cleveland FederalReserve Bank publication in which he argued the achievement oflow inflation around the globe reflected a competition amongcentral banks to satisfy market demands for sound currencies.

“Greater international competition among monies has putdiscipline on the behavior of national central banks,” hewrote.

He is well-versed in the history of banking regulation — apotential plus as the administration looks to shore up theFed’s regulatory side. His free-market views, however, leavehim with a decidedly antiregulatory bent, analysts said.

Kroszner’s has also examined international financialcrises, sovereign debt defaults and the role of theInternational Monetary Fund. At the Council of EconomicAdvisers, he took the lead on international issues.

“He has done a number of influential studies on theeconomic underpinnings of statutory changes in banking laws,”said University of Florida professor Mark Flannery. Flannery,who serves as co-director of the Center for Financial Researchat the Federal Deposit Insurance Corp., also said Kroszner isexpert in the area of corporate governance.

Kroszner is a senior fellow at the center and was inWashington last week for an annual meeting to help steerresearch efforts.




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