Fed Nominee Would Add Expertise On Credit
Monday, May 21, 2007
In nominating Larry Allan Klane to the Federal Reserve Board last week, President Bush reached into the McLean executive suites of one of the nation's largest banks and credit card issuers, Capital One Financial.
Bush pulled out a 46-year-old District resident, a registered Democrat who would bring to the central bank an expertise in consumer and small-business credit demand and conditions, according to analysts, Klane's associates and public records.
Klane "has an intimate knowledge of consumer finance," said Scott Valentin, a managing director at the investment bank Friedman, Billings, Ramsey who follows Capital One.
That could be valuable for the Fed as it considers how to better ensure that consumers understand their credit card bills and the terms of their credit card agreements and mortgage loans.
Some members of Congress say the Fed and other regulators were too lax in overseeing mortgage lending to subprime borrowers with poor credit histories and other factors that make them more likely to default. Congress is debating whether to strengthen consumer protections in mortgage lending and whether to change rules governing how banks manage risk.
If confirmed by the Senate, Klane would join a Fed board made up of four Ph.D. macroeconomists and a former Wall Street investment banker, none of whom are registered Democrats. Klane was nominated to fill one of two vacancies created over the past year by the departure of former bankers.
"The president was looking for someone with practical banking experience," said Emily A. Lawrimore, a White House spokeswoman. "He was impressed by Mr. Klane's distinguished record of service at some of the world's largest financial institutions."
Klane is president of global financial services at Capital One, a division that oversees home loans, installment loans, health-care finance and operations in Britain and Canada. The division "has been a good profit driver," Valentin said. "He's viewed as being very competent."
Christopher C. Brendler, managing director at the investment banking firm Stifel, Nicolaus & Co., also gave Klane high marks. Capital One "is a very well run company and he's a major part of it," Brendler said. "He's a very smart guy."
Bush is also nominating Elizabeth A. Duke, 54, former chairman of the American Bankers Association and now the chief operating officer of TowneBank in Hampton Roads, Va., to the Fed board. Klane's and Duke's backgrounds could be viewed as either assets or liabilities for the Fed, said Tom Schlesinger, executive director of the Financial Markets Center, a nonprofit group that monitors the central bank.
"The optimistic view is they bring real-world experience to a board that is heavily tilted toward academic expertise," Schlesinger said. "The pessimistic view is their perspective is narrowly based on what is good for the financial industry." He said he hopes the Senate Banking Committee, which votes on Fed nominees, "will ask some hard questions on where Duke and Klane stand on the relevant supervisory and regulatory issues."
Klane, who was born in Denver and grew up in Southern California, earned a bachelor's degree in philosophy at Harvard College and a master's of business administration degree at Stanford University.
Before joining Capital One, Klane worked for at Deutsche Bank's Bankers Trust unit, where he managed the global corporate trusts business. Earlier jobs were at the Walt Disney Co. and at management consulting firms William Kent International and Booz Allen Hamilton.
For more than a year, Klane also has been a member of the board of America's Promise Alliance, a nonprofit group founded by former secretary of state Colin L. Powell to promote volunteer work to help young people. Klane has been a "most active" board member, helping the group develop its strategies for the next five years, said the group's chairman, Alma J. Powell.
He is also "a great guy, very easy going . . . a lot of fun to be around," Powell said.
A Fed governor's salary is $168,000 a year. If confirmed, Klane would leave a job that, according to the most recent Capital One proxy statement, paid him $855,327 in 2003 in salary and bonus and other compensation worth more than $1.3 million.
Staff researcher Richard Drezen contributed to this report.