Anthony M. Solomon, Under Secretary of the Treasury for Monetary Affairs, yesterday was named president of the New York Federal Reserve Bank, effective April 1.
The surprise appointment makes Solomon, 60, a powerful figure in the nation's central bank system, second only to Federal Reserve Board Chairman Paul A. Volcker, who last year had moved to the top slot from the New York bank presidency.
As the sixth president in the New York Fed's 65-year history, Solomon automatically becomes vice chairman of the Federal Open Market Committee (FOMC), the key policy-making group of the entire reserve system.
Historically, the New York Fed has played a key role in the central bank.
The Federal Reserve Board's directives on management of the money supply are carried out by the New York Fed whole system. In addition, the New York Fed acts as agent for the system on international monetary affairs, such as intervening in the foreign exchange markets to support the dollar.
The president of the New York Fed is considered a shade more important than his 11 fellow regional bank presidents. The New York Fed itself is the largest of the banks, and operates in what is probably the world's biggest financial base.
Moreover, the New York Fed president traditionally has tried to display a sense of independence within the system. Fed-watchers like Henry Kaufman of Salomon Bros. in New York point out that Volcker as president of the New York Fed did not at times hesitate to express a minority view on the FOMC against what he considered the excessive credit expansion during the chairmanship of G. William Miller.
As Treasury under secretary -- first under former Treasury Secretary W. Michael Blumenthal, and the present secretary, G. William Miller -- Solomon played a lead role in shaping U.S. policy on international economic issues.
He has been the chief figure in moving the U.S. government from a position of opposition to one of support for the "substitution account" in the International Monetary Fund. In fact, his decision to stay in his post after Blumenthal left, he had told friends, was to assure a continuity of expertise that would help bring the substitution account to fruition.
This account, which will get serious study at the DMF's Interim Committee meeting in Hamburg on April 25, would be designed to allow central banks wishing to disgorge surplus dollars to get a market-basket-related asset from the DMF in exchange. Tentatively, a $50 billion Substitution Account is under discussion.
There was no word on a successor to Solomon at the Treasury. He will stay through the end of February, then take the month of March off before moving to New York.
Solomon is a Democrat, an economist who divided his career between government and the private sector, where he became wealthy in the food processing business. By his own admission, he has tended to become more conservative on economic issues than he used to be.
He will nonetheless be watched closely by the high-powered financial community in New York, because he has neither served the Federal Reserve system nor the private banking system before.
Solomon reportedly takes a sober view of the world economic outlook over the next couple of years. He believes that recent massive oil cartel price increases will put a combined inflationary-deflationary burden on the major industrial as well as poor nations over the next couple of years. Along with Blumenthal, he would have supported a more stringent monetary policy than was followed at the Fed last year under the direction of his current boss at the Treasury.
Solomon has been a leading advocate of granting more power in the international sphere to the IMP, even at the expense of giving up some of the freedom individual nations now enjoy to manage their own domestic economies. But he recognizes that the political process will make such changes painfully slowly, if at all.
He talked for a while after his close friend Blumenthal was fired last year of retiring, and giving more time to his sculpting. But he has a great pride in what he is doing.He admits to a "corny" sense of patriotism and duty, even through he tended to feel that the back-breaking load of work of a No. 2 man in a major department like Treasury often goes unappreciated by the White House.
Solomon studied at the University of Chicago, and at Harvard, where he received a doctorate in 1950. He has held a variety of jobs in government.