By Scott Lanman and Christine Harper
Jan. 14 (Bloomberg) -- The candidates for president of the New York Federal Reserve Bank include several with international experience, indicating officials may be seeking a new leader in the mold of departing chief Timothy Geithner.
Terrence Checki, the New York Fed’s head of emerging markets and international affairs, is a contender along with Paul Calello, chief executive officer of Credit Suisse Group AG’s investment bank in New York, who has held executive positions in Hong Kong, London and Tokyo. David McCormick, the U.S. Treasury’s undersecretary for international affairs, is also in the running, according to a person familiar with the deliberations of the New York Fed’s board.
In addition, New York Fed directors also interviewed Fed Governor Kevin Warsh, New York Fed markets chief William Dudley and H. Rodgin Cohen, chairman of the New York law firm Sullivan & Cromwell LLP, said the person.
Experience with global markets is “absolutely essential,” said Robert Feldman, head of economic research at Morgan Stanley Japan and a former official at the New York Fed. It’s “the key central bank in the U.S. Federal Reserve network and obviously it is the center for international transactions.”
Fed officials are seeking to replace Geithner, who is set to join President-elect Barack Obama’s administration as Treasury secretary next week. Regional Fed bank presidents are nominated by their boards and subject to approval by the Board of Governors in Washington, led by Chairman Ben S. Bernanke. Given the prominence of the New York Fed post, Bernanke’s preference is likely to be decisive.
Geithner Hearing
Geithner met yesterday with members of the Senate Finance Committee considering his nomination to answer questions about his failure to pay self-employment taxes while working at the International Monetary Fund and about a lapse of his housekeeper’s work status as an immigrant. Afterward, Chairman Max Baucus, a Montana Democrat, said he supports Geithner and wants to hold a hearing on his nomination on Jan. 16.
Geithner’s successor must deal with issues including a global recession, currency swaps with other central banks and meetings on financial markets around the world, former Fed officials said. Geithner brought international credentials to the Fed, having served in McCormick’s position under President Bill Clinton and lived in Africa, India, Thailand, China and Japan.
“It’s a huge dimension to the job,” said Scott Pardee, a former New York Fed official for international operations who now teaches at Middlebury College in Vermont. The president of the New York Fed needs to speak regularly with governors of other central banks around the world, frequently at night or on weekends, “so it’s got to be a very personal relationship,” Pardee said.
The New York Fed holds a seat at the Bank for International Settlements in Basel, Switzerland.
Wall Street Ties
International experience alone wouldn’t necessarily qualify someone to be New York Fed president, said Pardee. Relationships with top executives on Wall Street are also important, he said.
Dudley and Warsh have both worked closely with Bernanke and Geithner on the central bank’s response to the financial crisis. Cohen has led hundreds of lawyers at his firm representing financial services companies on work related to the crisis.
Dudley was chief U.S. economist at Goldman Sachs Group Inc. before joining the Fed two years ago.
Checki “was always ‘Mr. Inside,’” said Ethan Harris, a former New York Fed economist who is now co-head of economic research at Barclays Capital in New York. Checki is “heavily involved in fighting financial fires behind the scenes, particularly on the international front,” Harris said.
‘Sensible Stuff’
Checki doesn’t normally attend Federal Open Market Committee meetings and gives few speeches, preferring to operate behind the scenes. He doesn’t even talk much in those private meetings, though when he does, “he always had sensible stuff to say,” said William White, former head of research at the Bank for International Settlements.
Checki “struck me as a person who was more worried about the buildup of all these financial excesses than virtually everyone else,” White said yesterday.
Speaking at a conference in Athens in May 2007, before the financial crisis unfolded, Checki warned that “the recent period of stability may contain the seeds of its own undoing.”
“We know that low interest rates, low volatility and the seeming ability to trade out of almost any risk position create an obvious incentive to build up leverage, often in ways that aren’t transparent,” he said.
Asian Experience
Calello has been chief executive officer of Credit Suisse’s investment bank since May 2007 after spending five years in Hong Kong, where he oversaw the expansion of Credit Suisse’s business in Asia. He joined the bank as a founding member of its derivatives subsidiary in 1990 and has held executive positions in London and Tokyo as well as New York and Hong Kong.
Before joining Credit Suisse, Calello worked in the global markets group of Bankers Trust Co., now part of Deutsche Bank AG, and in the Fed’s monetary and economic policy research group in Boston and Washington.
Calello’s career on Wall Street has given him first-hand experience on how the Fed handles financial crises. In September he was one of the executives who participated in emergency weekend talks at the New York Fed about Lehman Brothers Holdings Inc. before the company was forced into bankruptcy. A decade earlier he represented Credit Suisse in discussions at the New York Fed on the bailout of hedge fund Long-Term Capital Management.
Call for Regulation
Last April, Calello became one of the first Wall Street executives to call publicly for more regulation of the credit derivatives market. Speaking at the International Swaps and Derivatives Association annual conference in Vienna on April 16, Calello said “all players in the market have a critical role in preventing a calamitous chain of counterparty failures and defaults.”
McCormick was appointed undersecretary for international affairs in August 2007. He came to Treasury from the White House, where he was deputy national security adviser for economic policy and humanitarian affairs.
He has led international affairs for Treasury Secretary Henry Paulson, coordinating with the Group of Seven nations and also working on the international environmental issues that have been Paulson priorities, such as the Clean Technology Fund and an energy partnership with China.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.
Posts
No comments:
Post a Comment