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Dallas Fed Struggles to Fill Fisher's Big Shoes

07/30/2015 | 03:01pm US/Eastern
By Michael S. Derby 

The Federal Reserve Bank of Dallas is taking its time picking a new president, leaving the position vacant for more than four months and leaving the institution without a strong public voice at a time of intense debate over when the central bank should start raising interest rates.

Former president Richard Fisher stepped down March 19, leaving the bank's first vice president Helen Holcomb to serve as interim president. His exit was long anticipated: he faced mandatory retirement due to his age. The bank formally announced Mr. Fisher's impending exit in November. Executive search firm Heidrick & Struggles was tapped to find a successor.

Other regional Fed banks, in contrast, have filled their top vacancies more briskly in recent years. For instance, Philadelphia Fed President Charles Plosser retired March 1 and his replacement, Patrick Harker, was announced the next day.

The duration of the Dallas vacancy has surprised many central bank watchers. Some of them say the bank's board of directors appears to want a clone of Mr. Fisher--a strong voice on major issues with deep ties to the Lone Star state.

"It's beyond bizarre" a new president hasn't been named yet, said Danielle DiMartino Booth, who served as a close adviser to Mr. Fisher when they were both at the bank. Ms. Booth, who left the Dallas Fed in June and is now a strategist with the Liscio Report, said what the bank appears to want is a rare commodity.

"Richard Fisher rose to the status of being a deity in Texas," Ms. Booth said. "People associate the success of the state" with him, and it is "very difficult" to find a new leader who can maintain that sort of profile, she said.

The Dallas Fed responded to questions about the search process by producing a description of what the bank seeks in a new leader. It said candidates should have "recognized stature" in economics and finance and preferably hold a Ph.D. The "ideal candidate will exhibit a strong combination of economic/market/policy expertise, integrity (and willingness to satisfy financial interest and disclosure requirements), leadership, communication skills, interpersonal skills, and community involvement," it said.

Before joining the Dallas Fed, Mr. Fisher was a wealthy hedge-fund operator and diplomat. He was known for a brash public style as president. He made his case against the Fed's easy money policies in speeches invoking high and pop culture, warning repeatedly about frothy financial markets and arguing in vain for higher interest rates.

His predecessor Robert McTeer, operating under the nickname of the "Lonesome Dove," was known for opposing rate rises--sometimes via haiku.

The Dallas Fed has "a tradition of having an outspoken leader," said Ethan Harris, chief economist at Bank of American Merrill Lynch.

Those with knowledge of the process say the Dallas Fed is seeking a replacement who will carry on that tradition.

Heidrick & Struggles didn't respond to questions about the search process.

The Dallas Fed president is chosen by the bank's board of directors, subject to approval by the Federal Reserve's Washington-based board of governors. The Dallas board members drawn from the financial industry are prohibited by law from participating in the search. The other Dallas board members who are involved declined to comment.

In recent years, regional Fed bank presidents have tended to be insiders. For example, San Francisco Fed President John Williams was previously the bank's research director. Cleveland Fed President Loretta Mester was previously research director at the Philadelphia Fed. Mr. Harker served on the Philadelphia Fed's board before taking the top job. Now, only current Atlanta Fed chief Dennis Lockhart had no formal connection to the central bank before joining. Mr. Fisher was the rare bird who came in cold.

"Recent history has shown that the regional banks conduct a thorough and broad review of candidates that almost exclusively ends with the insider being selected," said Aaron Klein, director of the financial regulatory reform initiative with the Bipartisan Policy Center in Washington.

Mr. Harris said central bank insiders, shaped by a Fed culture that often rewards a gray public persona, tend to lack the dramatic flair of the past two Dallas Fed chiefs.

Some critics from labor unions and local community groups say they are disappointed by the lack of openness surrounding the selection process given that the regional Fed bank presidents are government officials who participate in important central bank policy decisions.

"We are very disappointed in what we've run into" trying to have a voice in the process, said Mark York, secretary-treasurer of the Dallas AFL-CIO. He said a letter from the union and other local groups asked for names under consideration to be made public in a bid to allow the public to weigh in, among other requests.

That said, not all think the bright light of transparency is a cure all. Lou Crandall, chief economist for Wrightson ICAP, said wanting to know more about the process is a "fair point." But he warned "you don't want a lot of public jockeying over this."

Write to Michael S. Derby at michael.derby@wsj.com

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