Federal Reserve Governor Jeremy Stein, a thought leader on the linkage between monetary policy and financial stability, resigned from his post to return to teaching economics at Harvard University.
Stein, 53, will leave May 28 after two years as a governor, according to a statement released by the Fed today in Washington. His return to Harvard, which doesn’t extend leaves beyond two years, creates a vacancy for his term ending Jan. 31, 2018.
Stein departs amid growing concern among Fed officials that more than five years of interest rates near zero and trillions of dollars in bond purchases may give rise to asset-price bubbles.
“He had the intellectual heft to speak with authority on financial-market issues and macroeconomic issues, highlighting the potential risks” from quantitative easing, said Antulio Bomfim, senior managing director at Macroeconomic Advisers LLC in Washington. “He was a very influential guy. It is a loss for the Federal Open Market Committee and the Board.”
Bomfim added that Stein’s resignation wasn’t surprising given Harvard’s restrictions on leave.
Stein’s resignation leaves the Board with just three of seven governor positions filled: Chair Janet Yellen, Daniel Tarullo, and Jerome Powell, who continues to serve after his term expired in January. Powell is awaiting confirmation by the Senate along with two others nominated by President Barack Obama: Lael Brainard, a former U.S. Treasury undersecretary for international affairs, and former Bank of Israel Governor Stanley Fischer, who would serve as vice chairman.
“Jeremy has made important contributions and served as an intellectual leader during his time at the Board,” Yellen said in a statement today. “His understanding of monetary policy and markets as well as his expertise in banking and financial regulation has proven invaluable in his service to the Federal Reserve and the country.”
Stein has backed the Fed’s asset-purchase program, which has pushed its balance sheet to a record $4.23 trillion.
“During my time here, the economy has moved steadily back in the direction of full employment, and a number of important steps have been taken to make the financial system stronger,” Stein said in a resignation letter to Obama dated today and released by the Fed. “There is undoubtedly more work to be done in both dimensions.”
Stein said in February last year that some credit markets, such as corporate debt, showed signs of potentially excessive risk-taking. “We are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit,” he said in his speech in St. Louis.
Stein served in the Obama administration from February to July 2009 as a senior adviser to the Treasury secretary and on the staff of the National Economic Council. He was also a senior staff economist on the Council of Economic Advisers from September 1989 to June 1990.