April 13, 2010Fed loses second top official this year
Brian Madigan, the top Federal Reserve staff member on monetary policy, will become the second senior official to leave the US central bank this year as the economic recovery gathers strength.
Mr Madigan, director of the monetary affairs division since 2007, was a key adviser to Ben Bernanke, Fed chairman, as the US central bank lowered interest rates close to zero in response to the financial crisis and then took a series of unconventional steps to ease credit further during the recession.
Mr Madigan’s planned departure comes on the heels of the announcement last month that Don Kohn, Fed vice-chairman, would step down in June.
While turnover at the top of the Fed could be destabilising, it also reflects confidence among officials that the economic recovery is sufficiently entrenched for changes to be made.
“The hallmarks of Brian’s career have been exemplary leadership, keen insight and incredibly hard work,” Mr Bernanke said. “I am especially grateful for his dedicated service to the board and his country during one of the most difficult times in our nation’s financial and economic history.”
Mr Madigan will be replaced on July 23 by Bill English, his current deputy. Mr Madigan will then serve briefly as senior adviser to the Fed before retiring later in the year. Mr Kohn is expected to be succeeded by Janet Yellen, president of the Federal Reserve Bank of San Francisco, but that move has yet to be formally unveiled by the White House and will require confirmation by the Senate.
The head of monetary affairs presents policy options to members of the Federal Open Market Committee, which sets interest rates. In addition, Mr Madigan is a crucial bridge between the Fed and markets, since he prepares the statements that follow each meeting and minutes that summarise the discussion.
Among the biggest challenges for Mr English as he takes over will be how best to communicate moves by the Fed to begin raising interest rates and shrinking its balance sheet as the economy improves. Most economists believe the Fed will start tightening monetary policy to stave off inflation later this year or at the beginning of next year.
Ethan Harris, economist at BofA Merrill Lynch, says the importance of staff members has grown in recent years partly because several vacancies on the Fed board have been unfilled. Mr Harris also notes that the complexity of FOMC decisions has grown recently, making Mr Madigan’s role harder.
Mr Madigan joined the Fed in 1979 as an economist after earning a doctoral degree from Pennsylvania State University. He became associate director of monetary affairs in 1993 before rising to the top of the unit three years ago.
Mr English joined the Fed in 1992 and became a senior staff member in 2001.
AP
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