The Clinton administration is looking for a banker to fill one of the two vacancies on the Federal Reserve Board, a senior Treasury official said Friday.
"We are encouraging the submission of suggestions for bankers, particularly now with two seats opening up," said Under Secretary of the Treasury John D. Hawke Jr. "There's plenty of room to accommodate a banker."
The resignation notice late Thursday from Lawrence B. Lindsey, on top of the previously announced departure of Janet R. Yellen, creates an unusual opportunity for banker representation, said James Chessen, chief economist at the American Bankers Association.
"This is terribly important," Mr. Chessen said. "We need a knowledgeable person on the board who understands banking and finance."
There has not been a banking executive on the board since John P. LaWare stepped down in April 1995.
Mr. Lindsey, 42, who had three years remaining in his term as a Fed governor, said he plans to split his time between the American Enterprise Institute in Washington and Economic Synergies Inc., a New York-based adviser to international financial institutions.
Ms. Yellen was nominated last month to head the President's Council of Economic Advisers.
White House and Treasury officials said National Economic Council Director Gene Sperling would lead a search for Fed candidates from the business and academic communities.
"There will be a lot of recommendations from the industry," said Joe Belew, president of the Consumer Bankers Association. "But it is too early in the game to figure out who they will be."
"I wouldn't bet on" landing a banker on the Board of Governors, said a former Fed vice chairman, Alan Blinder. "But who knows? There are two vacancies."
That number could soon grow to three, Mr. Blinder noted, as Susan M. Phillips' term expires Jan. 31, 1998.
Federal law prevents the President from appointing more than one governor from any Federal Reserve district. Mr. Lindsey came from the Richmond, Va., Fed district; Ms. Yellen, from San Francisco. Other "open" districts are Kansas City, Cleveland, Minneapolis, Atlanta, and Boston.
"It is a good idea to get a banker," said Mr. Blinder, who advises the White House on economic issues. "But in practice it is not that easy."
Mr. Blinder said that, when his seat came open - it went to economist Alice M. Rivlin - it was hard to find banker candidates who were Democrats and willing to divest their bank stock.
Most bank economists lack stature for the post, Mr. Blinder added, though the administration considered several last time.
Mr. Lindsey, who joined the Fed in November 1991, was the central bank's expert on consumer and community affairs, helping to rewrite Community Reinvestment Act and consumer leasing rules. Beginning Feb. 5, he will become an American Enterprise Institute resident scholar, and he plans to write a book titled "Beyond Abuse and Neglect." He wants to chronicle the missteps of both Republicans and Democrats in their efforts to revitalize low-income areas.
Mr. Lindsey also will serve as a managing director at Economic Synergies, which advises European clients, primarily.
"I decided I have accomplished quite a bit and it was time for new challenges," Mr. Lindsey said in an interview Friday.
The former Harvard professor praised the banking industry's response on community development issues. "You rarely find anyone who claims that a shortage of capital is one of the main problems for urban areas," he said. "That is attributable to the banking industry."
Mr. Lindsey declined to comment on whether President Clinton should appoint a banker to the Fed. He urged the administration to search for an independent-minded person who could work closely with others.
He urged his successor to tour low-income communities and meet with bankers and activists. "Don't believe what they tell you in Washington," he said. "Go out and find out for yourself. Draw your own conclusions. Public policy suffers from the stereotypes of the right and left."
His successor also should continue the Fed's push to reduce banks' paperwork burden: "We have a lot of paper that doesn't necessarily help consumers," he said. "The mortgage area is by far the most egregious example of that."
He said Congress should reconsider whether all the requirements for banks to disclose interest rates, fees, and terms are worthwhile, he said.
Bankers and community activists said Mr. Lindsey would be missed. "The industry benefited from his leadership in trying to promote CRA reform," said Agnes J. Bundy, senior vice president at Fleet Financial Group Inc.
"He got people to understand the issue," said Mark A. Willis, president of Chase Community Development Corp. "He raised the quality of the debate. He was not afraid to deal with difficult topics."
Allen J. Fishbein, general counsel to the Center for Community Change, said Mr. Lindsey had begun his tenure as a conservative economist opposed to reinvestment laws. "He ended up as someone who recognized that there were market failures and CRA was a way of encouraging those failures to be overcome," Mr. Fishbein said.
