The President of the NY Fed announces his early retirement along with a few warnings
The Federal Reserve will face considerable changes in its executive staff, as now, along with the departure of Janet Yellen in February, the President of the New York branch has also stated his desire to retire earlier than expected.
William Dudley, the 64-year old economist who has been in office since 2009, had been a crucial puzzle-piece during the 2008 crisis, providing his expertise to both Timothy Geithner and Ben Bernanke to surf the difficult waters of a severe credit freeze.
A year after that, he became a prominent figure within the institution, actively participating in monetary policy decisions as the Vice Chairman of the Federal Open Market Committee (FOMC), becoming a close ally for Mrs. Yellen during all these years of near-zero interest rates.
His early retirement does raise a few questions, being a little bit unusual that he leaves the position only a few months before the actual date. In this regard, some of the comments he made during his latest speech might give us a clue on why he has made such decision, along with a few things to watch for in the future.
Dudley, who has been a strong supporter of the current state of affairs, mentioned his worries about precipitating towards changes in the regulatory framework in which banks currently operate. He commented on the matter that “it is critical that we do not forget the hard-learned lessons of the crisis and—in the haste to reverse course—undermine the robustness and resiliency of the financial system”.
This sounds like he’s worried about what Yellen’s successor might be prompted to do or how political cards will eventually play out, as America has a tendency to soften regulations when waters are calm, as they are now.
Perhaps Dudley’s concerns revolve around new potential deregulation that could threaten the stability of a yet-to-prove-stable financial system.
He also warned regulators, with the delicacy of a seasoned diplomat, saying “We had a woefully inadequate regulatory regime in place, and while it is much better now, there is still work to do. We should finish the job as quickly as possible, and we should do no harm as we adjust our regulatory regime to make it more efficient”.
It seems that the upcoming change of seats might be the underlying reason for Dudley’s departure, perhaps with the intention of protecting his strong legacy of stable markets and a growing economy… while it lasts?
Better to retire when you are at the top, right?
Now, President Trump has three important seats to fill within the Fed in the short run, and even though most market players are expecting a continuation of the current administration’s approach, Dudley’s early departure can be a sign that a few unexpected changes might be ahead.
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