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The Fed Board Is About to Be Four-Sevenths Empty

Janet Yellen, chairman of the U.S. Federal Reserve, from left, and Federal Reserve governors Daniel Tarullo, Sarah Bloom Raskin, Jeremy Stein, and Jerome Powell attend an open meeting of the Board of Governors of the Federal Reserve in Washington, D.C., on Feb. 18
Janet Yellen, chairman of the U.S. Federal Reserve, from left, and Federal Reserve governors Daniel Tarullo, Sarah Bloom Raskin, Jeremy Stein, and Jerome Powell attend an open meeting of the Board of Governors of the Federal Reserve in Washington, D.C., on Feb. 18Photograph by Andrew Harrer/Bloomberg

Considering that the Federal Reserve Board of Governors is one of the most powerful bodies in the world, it’s a bit alarming that it could soon be four-sevenths empty. Today Governor Jeremy Stein announced that he is resigning effective May 28 to return to his endowed chair at Harvard University.

As an expert in both finance and economics, Stein, 53, played a pivotal role in the Fed’s deliberations, as I wrote last year. In February 2013 he gave a widely noted speech in which he said that regulation alone may not be capable of preventing asset bubbles from forming if interest rates stay very low for very long. He said that “while monetary policy may not be quite the right tool for the job, it has one important advantage relative to supervision and regulation–namely that it gets in all of the cracks.”