White House mulls candidates for Fed

The White House is screening potential candidates to be members of the Federal Reserve and hopes to move swiftly to fill openings. Treasury Secretary Timothy F. Geithner is leading the search.

There are two vacancies on the Fed’s seven-member board in Washington. On Monday, the Fed’s second-highest-ranking official, Donald Kohn, announced he’ll step down at the end of June. Mr. Kohn’s departure would create a third vacancy, giving President Obama a chance to reshape the central bank.

Potential candidates include Janet Yellen, president of the Federal Reserve Bank of San Francisco; Christina Romer, chair of the White House’s Council of Economic Advisers; and Austan Goolsbee, a member of the council. Fed watchers also say Mr. Obama could opt for Republican Greg Mankiw, an economics professor at Harvard.

The White House didn’t say when Mr. Obama will announce his picks. His selections would have to be confirmed by the Senate.

“We’re very cognizant, obviously, of the vacancies, and understanding the importance of them, want to get those filled quickly,” White House spokesman Robert Gibbs told reporters Tuesday.

The vacancies are spurring debate over the future direction of interest-rate policy at the Fed. With the jobless rate at 9.7 percent, Mr. Obama may come under pressure to choose people who are considered “dovish” — more inclined to keep interest rates low to fight unemployment than to raise them to control inflation.

At the same time, Mr. Obama needs to be mindful that Wall Street investors must have faith in the Fed’s ability to prevent inflation from taking off once the economy is healthier.

The Fed’s interest-rate decisions influence the economy, employment and inflation, underscoring its power over the fortunes of ordinary Americans as well as Wall Street investors.

Mr. Geithner, who was president of the Federal Reserve Bank of New York, has a close relationship with Federal Reserve Chairman Ben S. Bernanke. They were part of a tight-knit team that devised the U.S. government’s strategy to fight the worst financial and economic crises since the 1930s.

Given that relationship, Mr. Geithner is likely to favor candidates who would work well with Mr. Bernanke. White House economic adviser Lawrence H. Summers is working with Mr. Geithner on finding candidates.

Mr. Obama has a delicate task. He will need to pick candidates who appeal to Democrats and aren’t objectionable to Republicans. And he’ll have to do so in an election year when many Americans are upset with Mr. Obama about Wall Street bailouts, high unemployment and rising home foreclosures.

A 40-year veteran of the Fed, Mr. Kohn announced his intention to step down when his term as vice chairman ends on June 23. Mr. Gibbs on Monday said the White House’s goal is to have Mr. Kohn’s replacement ready to take office once he leaves.

Associated Press writer Julie Pace contributed to this report.