The Federal Reserve Bank of Kansas City named Esther George, its No. 2 official, as president to succeed Thomas Hoenig, the U.S. central bank’s longest-serving policy maker, who is retiring.
George, 53, who has spent much of her career in bank supervision, has served as first vice president since 2009 and joined the bank in 1982, the Kansas City Fed said in a statement today. Hoenig, 65, who dissented from all Fed monetary-policy decisions in 2010, departs Oct. 1 under the retirement-age policy for regional Fed presidents.
George, who will vote on monetary policy in 2013, joins an unusually divided Fed policy-making group contending with unemployment at 9.1 percent and rising inflation. She may echo Hoenig’s opposition to record monetary stimulus and his criticism of policies supporting banks deemed “too big to fail,” said Troy Davig, a former Kansas City Fed researcher.
“She’s been listening to Tom for 20 years and working closely with him,” said Davig, now a senior economist at Barclays Capital in New York. “From everything I saw when I was there, they have a fantastic relationship, and I think that she was very convinced by his views.”
The Kansas City Fed doesn’t have texts available for speeches by George in recent years. She spoke in 2008 at a Commodity Futures Trading Commission forum in Washington, discussing then-emerging strains in agricultural finance, according to remarks posted on the CFTC’s website.
“The financial and economic landscape is changing in our region and around the world, and I am mindful of the challenges ahead,” George said in today’s statement.
During Hoenig’s 20-year career as leader of the Kansas City Fed, he repeatedly urged the Federal Open Market Committee to tighten monetary policy to prevent inflation from accelerating and asset-price bubbles from emerging. He voted eight straight times last year against near-zero interest rates and, later, bond purchases backed by Chairman Ben S. Bernanke, tying former Governor Henry Wallich’s record in 1980 for most dissents in a single year.
In congressional testimony July 26, Hoenig said the Fed shouldn’t subsidize investment banks by holding rates artificially low. “It is not the Federal Reserve’s job to pave the yield curve with guaranteed returns for any sector of the economy, and we should not be guaranteeing a return for Wall Street or any special interest group,” he said.
Three Fed presidents, representing the Dallas, Philadelphia and Minneapolis districts, dissented from the Fed’s Aug. 9 commitment to keep the target interest rate near zero until mid-2013. That was the most “no” votes since 1992.
George’s appointment maintains the level of banking expertise on an FOMC where a majority of participants, like Bernanke, are Ph.D. economists. George was born in St. Joseph, Missouri, and holds a bachelor’s degree from Missouri Western State University in St. Joseph and an MBA from the University of Missouri-Kansas City.
From 2001 to 2009, she was senior vice president in charge of the Division of Supervision and Risk Management, overseeing regulation of the Kansas City Fed district’s 170 state-chartered member banks and almost 1,000 bank and financial holding companies, today’s statement said. She worked in Washington in 2009 as acting director of bank supervision for the entire Fed system.
George will also continue Hoenig’s tradition of hosting and choosing topics and speakers for the regional bank’s marquee event, the annual summer symposium in Jackson Hole, Wyoming. The gathering draws dozens of central bankers from around the world.
Internal Fed Rules
Hoenig will retire exactly two decades after beginning his tenure in 1991. He is required under internal Fed rules to retire at age 65, an age he reached Sept. 6.
Hoenig lost his vote on monetary policy this year as part of an annual rotation among 11 of the 12 leaders of the regional Fed banks. The heads of the Chicago, Philadelphia, Minneapolis and Dallas banks vote this year. The New York Fed president has a permanent vote.
Adding George brings to two the number of women among the 12 regional Fed presidents. Sandra Pianalto has headed the Cleveland Fed since 2003, the longest tenure among regional chiefs after Hoenig. The Fed’s Board of Governors has three women out of five current members.
The last opening among Fed bank presidents was filled by John C. Williams, former research director of San Francisco Fed, who was promoted on March 1 to be that bank’s president.
Fed presidents are selected by boards of directors consisting of local business and community leaders chosen by banks in the region and by Fed officials in Washington. Bernanke and the Board of Governors have final say over the appointment of presidents. The Dodd-Frank Act of 2010 overhauling financial regulation removed commercial banks from having a direct say in the selection process.
The Kansas City Fed search committee was led by Terry Moore, president of the Omaha Federation of Labor in Nebraska and a member of the regional bank’s board of directors.
The Kansas City Fed is one of the 12 regional banks that aid in supervising commercial banks and processing checks as well as reporting on regional business conditions. The Kansas City district represents Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and the western third of Missouri.