Obama to Nominate Ex-Community Banker to Fed Board

By Pedro Nicolaci da Costa, Victoria McGrane and Jon Hilsenrath 

        The White House and the Federal Reserve on Tuesday moved to bolster the central bank's leadership ranks as it prepares to start raising interest rates this year for the first time in nearly a decade.
        President Barack Obama said he would nominate former community banker Allan Landon to the Fed's Board of Governors. Separately, the Fed board named staff economist Thomas Laubach to the powerful role of director of its monetary-affairs division, where he will become a close adviser to Chairwoman Janet Yellen on interest-rate decisions in the months ahead.
        Mr. Landon previously served as chairman and chief executive of Bank of Hawaii Corp. He has also worked at First American Corp. and Ernst & Young.
        "Allan Landon has the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy," Mr. Obama said in a statement. "He brings decades of leadership and expertise from various roles, particularly as a community banker."
        Mr. Laubach, however, could have a greater influence on Fed policy than Mr. Landon. In his new role, he will have a hand in many of the preparations ahead of policy meetings and a voice in discussions over strategy. He will also have a role in bolstering a monetary-affairs division that has been stretched thin in recent years by attrition and a heavy workload. Mr. Laubach succeeds William English, who said last year he would step down after four years in the high-pressure job.
        "Thomas Laubach is a highly regarded economist with deep expertise in macroeconomic modeling, monetary policy design, and policy communications," Ms. Yellen said in a statement. Mr. Laubach had been associate director of the Fed's research division.
        The seven-member Fed board has two vacancies. Three of the governors, including Chairwoman Janet Yellen, are economists. One, Daniel Tarullo, is a lawyer. The remaining governor, Jerome Powell, is a former private-equity executive who holds a law degree.
        The staffing shifts come as the Fed enters an important year for monetary policy. Officials are forecasting solid economic growth this year, and many investors expect them to begin raising interest rates from near zero sometime in the middle of this year as the economy strengthens.
        The White House announcement comes after a long campaign by community banks for a seat on the Fed board.
        Mr. Landon served as chairman and CEO of Bank of Hawaii from 2004 to 2010, then joined the University of Hawaii at Manoa's law school as a lecturer.
        The Landon nomination will be subject to Senate confirmation. Edward Yingling, a lawyer with Covington & Burling and former CEO of the American Bankers Association, gave Mr. Landon "excellent" odds in his confirmation process, in part because so many lawmakers support having a community banker on the Fed board. "He's known as a solid banker; I would think he would be in good shape for confirmation," Mr. Yingling said.
        In 2005, Mr. Landon was removed from the board of the Seattle Federal Home Loan Bank. The board said there was no wrongdoing but cited "the appearance of impropriety" when the Bank of Hawaii and Washington Federal redeemed $25.4 million of Seattle FHLB stock in October 2004.
        In arguing for better representation on the Fed board, community bankers--a powerful force in Washington--say large Wall Street firms have disproportionate influence over the Fed, which regulates banks.
        "Landon's experience as the CEO of a community bank and his broader sector experience will bring a much-needed community bank perspective to the board's deliberations," said Camden Fine, president and CEO of the Independent Community Bankers of America.
        Former Fed governor Betsy Duke, herself a former community banker, said Mr. Landon "brings a really broad background, which is good." Ms. Duke has known Mr. Landon since 1981 when her $50 million community bank hired him as its auditor. She said his experience could be particularly relevant to the Fed's regulatory work, as he understands the "nuts and bolts" of bank operations and how different accounting rules will affect banks' capital. "I think he'll be able to really think through a lot of details about implementation" of new bank rules, she said.
        Sen. David Vitter (R., La.) introduced legislation in the last Congress that would have required at least one of the Fed board governors to be a person with "demonstrated primary experience working in or supervising community banks" with total assets under $10 billion. The provision was revived this week in legislation extending the government's terrorism risk insurance program, which the House is scheduled to vote on this week.
        Mr. Landon wouldn't necessarily qualify under those criteria since Bank of Hawaii has $14.5 billion in assets as of the third quarter.
        Mr. Vitter said in a statement Tuesday: "Fed membership has dramatically shifted away from community bank experience and toward academic and economist experience. Those of us fighting against bailouts and the too-big-to-fail megabanks' special subsidies often get our voices drowned out by Wall Street." He added, "I look forward to meeting with and hearing from Allan Landon about issues facing community banks and main street."
        Ms. Yellen has publicly opposed the proposal, saying in July that while she would welcome having a community banker on the board, "I don't support requiring it via legislation."
        Roberto Perli, a partner at consulting firm Cornerstone Macro, said the Fed has often had a governor on the board with regional or community bank experience.
        "Those governors were important in ensuring communication between the Fed and the community bank industry; Landon (if confirmed) should ensure that positive interaction continues," he said. However, he added: "From a broader monetary or even regulatory policy perspective I don't think the nomination will make a material difference."
        Kristina Peterson contributed to this article.
        Write to Pedro Nicolaci da Costa at pedro.dacosta@wsj.com, Victoria McGrane at victoria.mcgrane@wsj.com and Jon Hilsenrath at jon.hilsenrath@wsj.com
        Access Investor Kit for Bank of Hawaii Corp.
        Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0625401098
        (END) Dow Jones Newswires

        January 06, 2015 18:09 ET (23:09 GMT)

#FX
#Forex
#CEO
#Obama
#Banker
#FedBoard
#KristinaPeterson