Obama considers Republican for one of two seats on Fed

August 12, 2011

President Obama is considering nominating two economists with backgrounds in finance — one of them a Republican — as Federal Reserve governors, according to a source familiar with the decision making.

The White House is looking at Jeremy Stein, a Harvard economist, and Richard Clarida, of Columbia University and the bond investment firm Pimco, to fill two vacant slots on the seven-member Fed Board of Governors. Clarida served in George W. Bush’s Treasury Department as an assistant secretary. Stein did a brief stint at Treasury under Obama.

The strategy of pairing a Democrat and a Republican for the two vacancies would be aimed at improving the odds of Senate confirmation. The president last year nominated MIT economist Peter Diamond, who won the Nobel Prize for economics while awaiting confirmation, but he was blocked by Republican senators.

The addition of Stein and Clarida would bring to the Fed’s policymaking board two highly regarded academic economists with expertise in both the theory of monetary policy and the nuts and bolts of financial markets and banking. Fed governors have a vote on monetary policy at every meeting of the Federal Open Market Committee.

Stein, 50, has a doctorate from MIT and has been at Harvard since 2005. His recent academic research has focused on bank capital requirements and financial regulation. He is a member of the Squam Lake Group, a bipartisan group of economists that has offered proposals on reforming the financial system.

Clarida, 54, a Harvard PhD who has been at Columbia since 1988, has published extensively on monetary policy and consulted with many of the world’s central banks. He was assistant secretary for economic policy at the Treasury Department in 2002-03 and also served a year on the White House Council of Economic Advisers staff during the Reagan administration.

Since 2006, Clarida has also been a strategic adviser to Pimco, the world’s largest bond investment fund. Top Pimco officials have been critical of the U.S. government’s financial situation in recent months and have eschewed Treasury bonds as a result.

Neither Stein nor Clarida responded to e-mails Friday afternoon seeking comment.

The possible nominations were first reported by the Wall Street Journal on Friday.

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