U.S. Fed Vice Chairman Kohn to step down, Obama gets chance to reshape

March 1, 2010

By Mark Felsenthal

WASHINGTON, March 1 (Reuters) – Federal Reserve Vice Chairman Donald Kohn, a 40-year veteran of the U.S. central bank, will step down in late June, giving President Barack Obama a chance to reshape the institution.

In a letter to Obama released on Monday, Kohn, who has served as the Fed’s No. 2 since June 2006, said he will depart when his current term as vice chairman expires on June 23.

“The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service,” Fed Chairman Ben Bernanke said in a statement.

Kohn, 67, began his career at the Kansas City Federal Reserve Bank in 1970 and rose through the ranks to become one of the more influential vice chairmen in the central bank’s history.

He has served on the Fed’s Board of Governors since August 2002.

His departure would leave three seats vacant on the normally seven-person Fed board in Washington, giving Obama broad latitude to shape the Fed at a time lawmakers are considering lessening its power after the most damaging financial crisis in generations.

Members of the Fed board are nominated by the president, but subject to confirmation by the U.S. Senate.

Among possible replacements, the president may be considering Christina Romer, a prominent economist who currently heads the White House Council of Economic Advisers.

Another possibility might be Fed Governor Daniel Tarullo, a lawyer and expert on banking regulation appointed by Obama, who could shepherd the bank into a greater focus on financial oversight and consumer protections.

(Reporting by Mark Felsenthal; Editing by Chizu Nomiyama) ((mark.felsenthal@thomsonreuters.com; Tel: +1 202 898 8329; Reuters Messaging: mark.felsenthal.reuters.com@reuters.net))

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