PhillyDeals: Plosser to leave as head of Phila. Fed

Economist Charles I. Plosser, best known for questioning the Federal Reserve's attempts to use cheap money to promote job growth, said Monday he'll step down as president of the Federal Reserve Bank of Philadelphia on March 1 instead of waiting until his term ends in 2016.

It's a personal decision for Plosser, 66, says Fed spokesperson Daneil Mazone. "Choosing to retire on March 1, 2015, will allow him to complete his voting year" on the Fed's Open Markets Committee, which sets interest-rate targets, as well as his term heading the Conference of Presidents of the 12 Federal Reserve districts, Mazone told me.

Local Fed districts like Philadelphia were set up to help balance the influence of policymakers in Washington and investment bankers in New York. Their presidents rotate on and off the Open Markets Committee, where dissenting voices like Plosser's are routinely outvoted by allies of the Fed chair, currently Janet Yellen.

Plosser's replacement will pick up his local responsibilities of listening to bankers, business people, and the occasional labor or community voice, monitoring regional banks and economic conditions, and overseeing the bank's waning role helping manage the physical supply of cash and checks.

The Philly Fed's president since 2006, Plosser is best known nationally as a "hawk," urging higher interest rates to prevent inflation, and favoring clear Fed targets and formulas for inflation-fighting, troubled-bank takeovers, and other actions, instead of just reacting to events.

While Plosser's warnings have briefly moved stock markets, a review by the Wall Street Journal of regional Fed presidents and senior officials ranked Plosser the worst for the accuracy of his economic predictions in 2008 to 2012. Yellen, a supporter of cheap money, was rated most accurate. In a brief statement Monday, Yellen said she'll miss Plosser's "keen insights, deep analysis, and good humor."

Plosser's replacement will be picked by a committee headed jointly by the current Philly board chair, James Nevels, an investment manager best known locally as the founding chairman of the state-controlled Philadelphia School Reform Commission, and Michael Angelakis, chief financial officer at Comcast Corp., the largest publicly traded company based in the Philadelphia Fed district, which includes eastern Pennsylvania, South Jersey, and Delaware.

Past Fed directors tell me privately that ideology doesn't play an obvious role in the selection process. More often, search committee members, aided by Fed staff and an outside search firm, look for signs of an economist's prominence, such as Plosser's status as head of the conservative "Shadow Open Market Committee," or predecessor Anthony Santomero's role as head of Wharton's Financial Institutions Center.

The directors may consider internal Fed candidates: Loretta Mester, former head of the Philly Fed's research unit, was picked as the new president of the Federal Reserve Bank of Cleveland this year.

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