N.Y. Fed loses top officers in rare double exit

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The Federal Reserve Bank of New York said two of its top officers are departing — including Simon Potter, who oversees its strategically vital trading desk — in a rare double exit from its senior ranks.

Potter and fellow executive vice president Richard Dzina, who ran the bank's financial services group, will both step down June 1, the bank said in a statement Tuesday. It will launch a search to find their successors.

Their departures — which between them take almost 50 years of New York Fed experience with them — come about a year into John Williams' tenure as president of the bank.

Potter had been seen in some quarters as a potential contender to take the helm in New York before Williams, who was then head of the San Francisco Fed, won the pick. The New York Fed is the most important of the 12 regional Fed banks because of its oversight of Wall Street and execution of monetary policy via the desk that Potter ran. The head of the New York Fed also wields a permanent vote on the central bank's interest rate-setting Federal Open Market Committee and is the panel's vice chair.

Dzina did not immediately respond to a request for comment. Potter referred questions to the New York Fed.

The abrupt departures come at a delicate time for the central bank as it finishes shrinking its balance sheet. The wind-down process, which Potter oversees as the head of the New York Fed's markets group, will end later this year, but policymakers have yet to decide important questions on the long-term maturity composition of its bond holdings.

Short notice

"I'm very surprised that both of them would do this on the same day with three days' notice," said Tom Simons, a senior economist at Jefferies in New York. Simons said Potter's job, as head of the central bank's open-market operations, is "arguably more important than being president of the some of the regional Fed banks."

He said the departures are especially worrying for market participants given the uncertainty hanging over the New York Fed's plan, in conjunction with the U.S. Treasury, to replace the scandal-tainted London interbank offered rate with a new dollar-based benchmark rate, known as the Secured Overnight Financing Rate.

Potter had been scheduled to give a speech in Hong Kong on May 30 on the transition from Libor. He now won't deliver those remarks, said New York Fed spokesman Jack Gutt.

Bloomberg News