Replacing New York Fed President Bill Dudley may be one of the most controversial Fed appointments in recent memory.
Dudley, who is in his mid-60s, announced his retirement last week, likely by the spring or summer, and speculation is already rife in markets about who will get his job.
Some call it the second-most important job in the Federal Reserve system. It's so critical that during the creation of the Dodd-Frank financial reform legislation, some in Congress proposed to make it a presidential appointment.
The head of the NY Fed oversees supervision of the big money center New York banks and executes the market trades needed for the Fed to hit its benchmark funds-rate target. It was the bank that did most of the heavy lifting for the Fed to acquire the trillions in assets under the quantitative easing program, and it will be on the front line of selling those assets as the Fed now unwinds its balance sheet.
Most important, the NY Fed president is first among equals of the 12 regional bank presidents. The president serves as the vice chairman of the Federal Open Market Committee, which sets monetary policy, and always has a vote. The other regional presidents rotate as voters.
The opening comes at a time when the Fed is under pressure to appoint more diverse presidents. Of 135 regional bank presidents, six have been women (three from the Cleveland Federal Reserve) and three have been nonwhites (two from Minneapolis), according to Aaron Klein of the Brookings Institution. Eleven regional banks have never had a nonwhite president and eight of 12 have never been led by a woman.