Alan Blinder left work Wednesday for the last time as vice chairman of the Federal Reserve Board, unsure whether his crash course on banking had been worth it.

The Fed, he said in an interview this week, may not be the right agency to regulate banks.

"President Clinton didn't send me here because he thought I was an expert on bank regulation," said Mr. Blinder, an economist by training.

Sitting amid half-packed boxes in his office, Mr. Blinder said banking issues had occupied at least 60% of his workweek. Some rules are so technical that they distract the board of governors from its monetary policy role, he said.

"When you get down to the nitty gritty of 4(c)(8) applications, Truth- in-Lending, or Respa, I have a hard time seeing any synergies with monetary policy," he said.

An ideal system would have two Federal Reserve boards, he said - one to make monetary policy and one to weigh regulatory issues, with a single chairman presiding over both.

But he said he doesn't expect any change. The current system works well enough to stymie efforts to consolidate the banking agencies, he said.

These comments are considered heretical within the Federal Reserve System, which has religiously guarded its regulatory role, Fed watchers say. But Mr. Blinder said that leaving his job frees him to speak out about a system that doesn't always work correctly.

He said his successor should question Fed staffers, on whom governors rely heavily for advice.

"A bureaucracy like that needs to be constantly challenged," he said. "There is a huge danger of developing a uniformed group think."

His biggest regret, he said, was not hiring a law clerk capable of giving him independent advice on banking regulations.

"I count that as my biggest mistake," he said. "The staff would have protested real hard, but I could have stamped my feet really hard and gotten it."

On the merger front, Mr. Blinder said he doesn't believe the Fed will impede industry consolidation so long as several competitors remain in a given market.

He expressed doubt, however, that the latest round of mergers would enable banks to cut costs and boost profits. "But it was none of my business as a regulator," he said.

Mr. Blinder said the nine hearings held by the central bank on mergers were particularly helpful to him, and illustrate the need for public sessions.

"There are many people in society who don't know about the Federal Register and are not going to write a comment letter," he said. "Those people are disenfranchised if you don't have a public hearing."

Mr. Blinder said he was "pretty well satisfied" with revised Community Reinvestment Act rules, which were drafted, approved, and partially adopted during his tenure. "It strikes a balance between consumers, bankers, and the four banking agencies," he said. "It has a reasonable chance of working."

Mr. Blinder's decision to leave the Fed surprised some observers. But he said he wanted to return to a recently built house in Princeton, N.J., where he teaches at Princeton University. He also said he feared getting so caught up in Washington that he wouldn't want to return to teaching.

Only one opportunity would have changed his mind, he said.

"Who would turn down the chairmanship of the Federal Reserve?" he asked. "But it was never offered to me, and I didn't expect it to be."

Mr. Blinder was the President's first appointee to the board, serving from June 1994 until his term expired Jan. 31. Although he is returning to Princeton, where he will teach a money and banking course, Mr. Blinder said he plans to lobby his administration friends on economic, poverty, budget, and exchange rate policies.

The former Business Week columnist said he'd like to resume writing, although he doesn't know whether he will restart his weekly column. He also said he hopes to return to an economic research center he helped create at Princeton.

Mr. Blinder said he won't miss the media posse that used to follow him to every speaking engagement, hoping he would comment on the economy or interest rates. "I feel sorry for those people because they know I'm not going to say anything," he said.

Still, he said, the Fed has a responsibility to let the public know what's going on. Keeping quiet is a "dereliction of duty," he said.

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