Governor to Leave Fed After 14 years

Federal Reserve Gov. Edward Kelley said Monday that he intends to resign the post he has held for 14 years as soon as one of the two currently empty slots on the central bank’s board is filled.

Combined with another post to open up in January 2002, Kelley’s announcement gives the Bush administration a chance to name its picks to four of the Fed board’s seven seats--potentially changing the complexion of the world’s most powerful central bank.

Kelley, 69, said he was stepping down for personal reasons.

President Bush has yet to put forward nominees for the two empty seats on the Fed board, but a White House spokeswoman said the administration is “moving expeditiously” to fill those vacancies.

Since July 1999, the central bank has been operating with five members. The board needs at least four members to conduct business.

Kelley, named by President Reagan in 1987, said he intends to remain on the board as long as necessary “to accommodate the need for a minimum of five active board members.” He said he was announcing his plans “to provide substantial notice to my colleagues and the administration.”

With the term of Fed Gov. Laurence Meyer, a Clinton appointee, expiring Jan. 31, 2002, Bush will have the opportunity to name four governors in seven months--sharply increasing the administration’s influence over the agency that controls U.S. monetary policy and sets short-term interest rates.

But Fed Chairman Alan Greenspan’s power is such that new board members may not have a big impact on policy soon, said David Jones, economist with bond dealer Aubrey G. Lanston & Co. and a veteran Fed watcher. However, new members could become more important down the road when a successor to Greenspan is needed, he said.

Fed policy is set by the Federal Open Market Committee, composed of the seven permanent governors and a rotating slate of five regional Fed bank presidents.

During his tenure, Kelley cultivated a reputation as a plain-spoken, quiet governor who carved a niche between inflation “hawks” and “doves.” Greenspan praised Kelley on Monday, calling him “a man of the highest principle.”