July 11 (Bloomberg) -- Federal Reserve Governor Elizabeth Duke, a former community banker who focused on regulation, plans to resign her seat effective Aug. 31.
Duke, who never dissented from a Federal Open Market Committee decision, submitted her letter of resignation to President Barack Obama and made no announcement about her future plans, the Fed said in a statement today in Washington.
“Betsy has made invaluable contributions to the Federal Reserve and to the country during her five years at the Board,” Fed Chairman Ben S. Bernanke said in the statement. “She brought fresh ideas grounded in her deep knowledge of the banking industry and the real-world dynamic between borrowers and lenders.”
Duke’s departure creates another opportunity for Obama to leave his stamp on the Fed’s seven-member board. The president also needs to choose who will lead the central bank after the expiration of Bernanke’s second term on Jan. 31. Duke, 60, took office in 2008 and is the only governor not appointed or reappointed by Obama. Her term expired on Jan. 31, 2012, and she continued to serve in the absence of a replacement.
“I am especially gratified to have brought my own practical banking experience and community banking perspective to the massive overhaul of financial system regulation that was required by the provisions of the Dodd-Frank Act,” Duke said in her letter to Obama. “The Federal Reserve has worked with other regulators to craft a regulatory framework that will ensure a resilient financial system.”
Amy Brundage, a White House spokeswoman, posted a message on Twitter saying Obama “is grateful to Elizabeth Duke for her years of valued service” at the Fed in Washington. While House Press Secretary Jay Carney said he has no announcements to make on a replacement. He declined to say whether there would be any effort by the president to nominate a successor before the August recess of Congress.
Duke, a graduate of the University of North Carolina at Chapel Hill, had aspired to be an actress yet started a career in banking with a job as a part-time drive-through teller because she “needed a job,” according to a speech she gave in January 2012 at the University of Richmond in Virginia.
She then joined a small community bank and became chief executive of its 11 employees, after the president of the bank, her mentor, died of a heart attack, according to her speech. She later served on the Richmond Fed’s board of directors and became the first female chairman of the American Bankers Association.
“She brought to the Fed something that the board should always have and that’s someone who has strong practical banking and community lending experience,” said Ed Yingling, a partner at Covington & Burling LLP in Washington and a former ABA president. “I’m sure Ben Bernanke appreciated the advice she gave him during her tenure. She helped all of them understand what’s happening on Main Street.”
Duke served as a banking executive at SouthTrust Bank, Wachovia Corp. and as chief operating officer of TowneBank, a Virginia-based community bank. She was a director at the Richmond Fed from 1998 to 2000, and from 2004 to 2005 she served as chairman of the ABA, the Washington-based trade group.
Duke was nominated by President George W. Bush to join the Fed board and won confirmation from the Senate, beginning her term on August 5, 2008, just one month before the financial crisis intensified when Lehman Brothers Holdings Inc. roiled global markets by filing the largest bankruptcy in U.S. history.
“The board was enriched by having someone who could add to the fabric of discussion because of her practical, hands-on, real-world, day-to-day experience,” said Eugene Ludwig, chief executive officer of Promontory Financial Group LLC, a Washington-based consulting firm, and a former U.S. Comptroller of the Currency. “The board needs important and globally prominent economists but having a governor or two with this practical experience has always proved to be a big plus.”
While Duke didn’t dissent on monetary policy, she did dissent in December 2008 from a decision to approve GMAC LLC’s conversion to a bank holding company. The decision allowed the auto lender to tap U.S. financial bailout programs and help keep the automaker then known as General Motors Corp. in business.
In her speeches, she often discussed conditions at community banks and along with Governor Sarah Bloom Raskin served on the board’s subcommittee overseeing supervision of community and small regional banking organizations.
Duke also disagreed with her Fed colleagues when they instituted a cap on debit card swipe fees at 21 cents. She argued that the cap was likely to harm small banks and raise the costs for checking-account holders. Setting a cap was required by the Dodd-Frank financial regulation law.
Governors Jeremy Stein and Jerome Powell joined the board in May 2012, bringing it to a full contingent of seven for the first time since 2006.
Members of the board include: Bernanke, Stein and Vice Chairman Janet Yellen, all economists; Daniel Tarullo, a former professor at the Georgetown University Law Center; Raskin, a former top bank regulator for Maryland; and Powell, an attorney and private equity investor who was a Treasury undersecretary for President George H.W. Bush.
-- With assistance from Roger Runningen in Washington. Editors: James Tyson, Mark Rohner
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