WASHINGTON – Bankers Susan Bies and Mark Olson will walk through the doors of the U.S. Federal Reserve for the first time as Fed governors burdened already with a tough task — the nation's first recession in a decade.
Bies and Olson, who were sworn in on Friday, will start work as the U.S. central bank tries to reignite an economy still shell-shocked by the Sept. 11 attacks on Washington and New York. Their first major task will come Tuesday, when the Fed meets to discuss and vote on interest-rate policy.
The Fed is widely expected to cut its hook consumer confidence and led to massive layoffs at firms throughout the country. After some political wrangling, Bies and Olson were confirmed by the Senate Thursday night.
"There are some real challenges ahead of them," said former Fed Governor Lyle Gramley, who is now a consulting economist at the Mortgage Bankers of America.
"They do have an economy that is in recession," he said. "It's the Fed's job to make sure that this recession remains mild in terms of both depth and duration."
WHAT DO YOU THINK, MR. GREENSPAN?
While Bies and Olson will immediately have a vote on the Fed's 12-member policymaking panel, Fed-watchers think they will take their cues from Chairman Alan Greenspan.
"I would expect that they will take the lead from the chairman," Economics from Washington President Douglas Lee said. "They'll participate, but they won't be influencing things for a while."
Economists said the biggest challenge for Bies and Olson and the other U.S. central bankers will come next year, when a turnaround is expected in the economy. At that point, the Fed will have to decide when to change course and actually raise interest rates.
"They're going to be getting into some tricky decisions as to when to reverse policy," said Wayne Ayers, chief economist at FleetBoston Financial.
Both Bies and Olson have experience that should serve them well on the Fed, especially when it comes to the central bank's role as a banking supervisor.
Bies spent 21 years with First Tennessee National Corp., a Memphis, Tennessee bank. She is also a Ph.D. economist and has worked at the Federal Reserve Bank of St. Louis.
Olson is a former Minnesota banker who headed up the American Bankers Association in 1986 and 1987. He has also worked as a staff member for the Senate Banking Committee.
St. Louis Fed President William Poole said the biggest challenge for someone joining the Fed board in Washington is learning the complexities of drafting banking regulations in a political environment.
"They are very complicated issues. They are complicated technically and they are often complicated politically," he said after delivering a speech in St. Louis last month. "People who have not served in Washington will probably have just as big a learning curve on that side of it as I had on the management side of it."
The Federal Reserve has had two empty seats on the board since 1999. But even though Olson and Bies are filling those two slots, another seat will soon be vacant.
Governor Edward Kelley said earlier this year he would leave the Fed once either Bies or Olson were confirmed. The Fed said Friday Kelley will not attend the meeting Tuesday but it is unclear when he will officially step down.
The president will also need to fill Governor Laurence Meyer's seat when his term expires in January. Meyer has said he does not plan to seek another term.
Bush may also need to fill the most important position on the Fed board before the end of his term. Greenspan was reappointed last year to a fourth, four-year term as chairman. That term ends in June 2004, when Greenspan will be 78. Greenspan's separate term as a board member expires in 2006.