Financial Regulatory Forum

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

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.

Fed’s Kohn warns on interest rate risk

By Karey Wutkowski

ARLINGTON, Va., Jan 29 (Reuters) – A senior U.S. Federal Reserve official warned on Friday that the uncertain path of interest rates poses risks for banks inattentive to the match of durations among their assets and liabilities.

Federal Reserve Vice Chairman Donald Kohn told a conference sponsored by the Federal Deposit Insurance Corp that the usual uncertainty about interest rates in coming months is compounded in the current situation by the fact that rates are near zero and the Fed has massively expanded the amount of reserves in the banking system.

“Borrowing short and lending long is an inherently risky business strategy,” Kohn said. “Intermediaries need to be sure that as the economy recovers, they aren’t also hit by the interest rate risk that often accompanies this sort of mismatch in asset and liability maturities.”

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