Narayana Kocherlakota, an economics professor at the University of Minnesota with expertise in finance and banking, has been named the new president of the Federal Reserve Bank of Minneapolis.
He replaces Gary Stern, says Bloomberg News.
Kocherlakota, 45, is a former chair of the university’s economics department who has researched the effects of excessive risk-taking on asset prices, and was an economist at the Minneapolis Fed from 1996 to 1998.
The big picture, according to Bloomberg:
Kocherlakota joins the central bank as policy makers seek to strengthen a recovery from the deepest U.S. recession since the Great Depression, and from a crisis that led to $1.62 trillion of writedowns and losses worldwide at financial institutions. Under Stern, the Minneapolis Fed had warned about the risks posed by financial institutions deemed “too big to fail.”
“Continuing the research and policy developments on the implications of ‘Too Big to Fail,’ and how we avoid the type of financial crisis that we just faced, is clearly going to be an important role” for Kocherlakota, Minneapolis Fed Research Director Art Rolnick said in a telephone interview.
He’s got credibility, the local Fed chairman said:
Jim Hynes, chairman of the Minneapolis Fed board, said “several dozen” possible candidates were considered to lead the bank. The selection of Kocherlakota reflected a desire to find someone who has the credibility to “continue to lead and foster important research” from the bank, he said.
“Even though somebody may look at him as an outsider, he spent the past 10 years as a consultant to the Minneapolis Fed research department,” Hynes said. “He has what we believe is a good understanding of policy-making issues.”
The Fed has 12 district banks across the U.S. that supervise lenders and gather information on their regional economies. The presidents of four of the banks sit on the interest-rate setting Open Market Committee on a rotating basis, while the New York Fed chief has a permanent slot. Kocherlakota won’t vote on interest rates until 2011.