The Clinton administration is learning that it isn't easy to get a banker on the Federal Reserve Board.
Political realities, financial issues, and legal requirements are preventing the administration from convincing candidates to fill the slot that ex-banker John P. LaWare vacated last April.
The administration's biggest problem is finding a Democrat in an industry chock full of Republicans.
As one official close to the administration said half jokingly, "There are only four Democratic bankers in the country. One is the head of Bankers Trust, one turned the job down, and the administration is trying to find the other two."
Another stumbling block is a prohibition against Fed governors' owning bank stock. Observers said this could create an enormous tax liability for seasoned bankers, who would have to liquidate their stock and options.
A tax lawyer at a major law firm said there is no loophole to avoid the tax tab, which could reach into the millions of dollars.
One banking industry official said the tax problem has caused several candidates to reject the post, including John G. Medlin Jr., the former chairman of Wachovia Corp. He was an early favorite of the administration and banking community.
Taxes also would make it costly for other bankers - including retired BankAmerica Corp. chairman Richard M. Rosenberg or NationsBank chairman Hugh L. McColl - to take the job.
Both these bankers are considered Clinton supporters, making their nomination plausible. An official close to the administration said the list of Democratic bankers doesn't extend much further. Terrence Murray at Fleet Financial Group may be the only other big-bank chairman considered a Friend of Bill.
The administration also has found that top bankers, after building up their institutions, aren't ready to play second fiddle to Fed Chairman Alan Greenspan, who wields most of the power at the central bank.
An administration official also said that younger bankers don't want to sideline their careers.
"It really has been very hard to find someone willing to leave an active job and come to the board," he said.
Bert Ely, president of the industry consulting firm Ely & Co., said he's not surprised that bankers don't want the job. The Fed has not been a major stepping stone to the chairmanship of a major bank, he said.
The Treasury department, he said, with scores of positions available, offers a better chance of future rewards. For example, Frank Newman enhanced his career with a tour at Treasury, jumping from BankAmerica's chief financial officer to chairman of Bankers Trust.
Mid-career bankers also have financial impediments. They have not built up the nest eggs needed to maintain their lifestyles on a Fed governor's $123,100-a-year salary.
The administration also apparently is receiving some flak from the Council of Economic Advisers, which wants the President to pick an economist.
Finally, the administration is confronting a geographic problem. A federal law prevents the President from appointing more than one person from each Fed district. That eliminates bankers from New York, Chicago, San Francisco, Richmond, and Dallas - districts the five sitting Fed governors currently represent.
Congressional Republicans vowed in 1980 to strictly enforce this geographic restriction. That would be bad news for New York investment banker Felix G. Rohatyn, widely considered the leading contender for the Fed's vice chairman position, which Alan Blinder left Jan. 31, when his term expired. It also eliminates several major banking centers - and their chairmen - from contention.
The administration is under particular pressure to find a candidate now. Mr. Greenspan's term expires March 2, and several observers said the administration wants to package his renomination with replacements for the two open seats.
Banking industry officials said they aren't surprised with the administration's troubles. "They think they need a CEO who is a Democrat," one industry official said. "That's why they can't find a banker."
Suggesting the administration lower its sights, industry officials are touting several bank economists for Mr. LaWare's seat. A bank economist would provide the banking experience the industry wants, along with the economic knowledge some administration officials are seeking.
Topping the list are Norwest Corp. chief economist Sung Won Sohn, former Barnett Banks Inc. chief economist John Godfrey, First Chicago NBD Corp. chief economist James Annable, First Union Corp. chief economist Joel L. Naroff, and First Security Corp. economist Kelly K. Matthews.
Mr. Sohn and Mr. Naroff declined to comment. The others did not return calls.
An administration official was not enamored with the prospect of appointing a bank economist. "People who feel the board needs a banker don't feel a bank economist would fill that role," the official said.
