Obama tapped into his home state to select Allan R. Landon, who was chief executive of the Bank of Hawaii from 2004 to 2010.
The bank is the second largest in Hawaii and 94th nationally with $14 billion in assets, according to the latest rankings from USBankLocations.com, an industry directory.
Before becoming CEO, Landon worked in various positions at the bank. He also was chief financial officer at financial firm First American Corp. and its subsidiary, First American National Bank.
Before going into banking, Landon was a longtime partner at the auditing firm
"Allan Landon has the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy," Obama said.
"He brings decades of leadership and expertise from various roles, particularly as a community banker," Obama said. "I'm confident that he will serve our country well."
Obama's grandmother, Madelyn Payne Dunham, was a vice president of the Bank of Hawaii for years. When she died in 2008, Landon and other bank officials organized a memorial service for her in Honolulu.
A White House spokesman said he didn't know if Obama, who was raised in Hawaii and vacations there, had a relationship with Landon.
The seven-member Fed board has two vacancies.
Fed governors serve 14-year terms and also are voting members on the Federal Open Market Committee, which sets monetary policy.
Three of the five Fed governors are economists, including Chairwoman Janet L. Yellen. The other two are lawyers.
The only Fed board member with private banking experience is
The Fed board had been without a member with community banking experience since Elizabeth Duke, a former Virginia banker, stepped down in August.
Vitter introduced legislation that would require at least one Fed board member to have experience working at or supervising community banks. The bill was included as an amendment to a bill that passed the
"Community banks have been getting the short end of the stick in the financial sector and it's only gotten worse since the financial crisis and megabank bailouts," Vitter said at the time.
Camden Fine, president of the Independent Community Bankers of America, said Tuesday that the group supported Landon's nomination.
"Landon's experience as the CEO of a community bank and his broader sector experience will bring a much-needed community bank perspective to the board's deliberations," Fine said.