In a statement, the Dallas Fed said it sought a president with both business and leadership experience with a commitment to public service. Kaplan has spent nearly a decade at Harvard but worked even longer at Goldman Sachs, where he rose to become vice chairman and head of investment banking and investment management divisions. He is also co-chairman of the Draper Richards Kaplan Foundation, which invests in nonprofit groups working to solve social issues.
“We met our goal of finding someone who has a deep understanding of the economy, financial system and monetary policy — yet who also sincerely appreciates the impact decisions made by the Federal Reserve have on people from all walks of life,” Dallas Fed Board of Directors Chair and University of Houston Chancellor Renu Khator said.
Kaplan is one of several new faces among the Fed’s top ranks. The Federal Reserve Bank of Philadelphia appointed Patrick T. Harker, the former head of the University of Delaware, as its president in March, and he started last month. While a replacement has yet to be named, the Minneapolis Fed will need a new president when Narayana Kocherlakota steps down from his post to join the faculty at the University of Rochester.
The Fed consists of 12 reserve banks headquartered across the country and a seven-member board of governors based in Washington. The White House has nominated two people — University of Michigan economist Kathryn Dominguez and Bank of Hawaii chief executive Allan Landon — to fill vacant seats on the board. But the Senate must confirm them, and Banking Committee Chairman Richard C. Shelby (R-Ala.) has yet to schedule a hearing.
The makeup of the Fed’s top tier is critical in shaping the course of monetary policy. The central bank is preparing to raise its benchmark interest rate for the first time in nearly a decade — a move that has Wall Street on tenterhooks. The timing of liftoff and the pace of subsequent increases could have broad ripple effects throughout the economy. Moving too soon or too quickly could undermine the recovery’s momentum, but waiting too long or going too slowly could push inflation too high or create bubbles in the financial system.
These are the weighty decisions facing Fed officials over the next few years. The board of governors and the head of the New York Fed sit on the central bank’s policy-setting committee along with a rotating group of four other reserve bank presidents. Many of the officials who responded during the darkest days of the financial crisis in 2008 — including former Fed chair Ben S. Bernanke — are no longer with the central bank, leaving new guards to wrestle with the thorny questions of how to unwind the Fed’s crisis-era policies.
Kaplan will represent Dallas when the reserve bank gets a turn on the committee in 2017.
Reserve bank presidents are appointed by the bank's board of directors, though members who work at an institution supervised by the Fed are barred from participating. The Fed’s board of governors must also approve the selection.
That process has been criticized as convoluted and overly opaque. The activist campaign Fed Up has called for greater transparency and for more public input during the selection process. They noted that Kaplan is on the board of directors of the executive search firm that placed him at the Dallas Fed.
“If the public was involved or knew about how this appointment process really worked, the revolving door might stop and that’s not something they want,” said Shawn Sebastian, policy advocate at Fed Up.
Kaplan was initially contacted by a member of the bank’s search committee and went through the same selection process as other candidates. Kaplan will step down from his role at the search firm, Heidrick & Struggles, as well as his positions at other companies before taking the helm at the bank.