The Federal Reserve Bank of New York will launch a major restructuring to consolidate the bank's open market and foreign exchange operations under the direction of Executive Vice President William J. McDonough, New York Fed President E. Gerald Corrigan announced yesterday.
As part of the restructuring, Mr. Corrigan announced the retirement of longtime New York Fed staffer Peter D. Sternlight, an executive vice president and the manager of the Fed's open market and market surveillance operations. Mr. Sternlight began his career in 1990 as an economist in the foreign research division. He will take an early retirement, effective Sept. 30.
The move will become official during the Aug. 18 meeting of the policy-making Federal Open Market Committee and take place after Mr. Sternlight's departure. Mr. Sternlight has headed the Fed's open market desk, which conducts reserve operations, for the past 13 years. The desk implements the monetary policy decisions of the FOMC.
"All of us in the bank, and the Federal Reserve System, will miss Peter dearly," Mr. Corrigan said in a statement. "Peter's competence, dedication, and absolute integrity have earned him universal respect and admiration."
Mr. McDonough, head of the bank's foreign desk since Jan. 6, conducts foreign exchange policy decisions on behalf of the U.S. Treasury.
Other responsibilities of the foreign department include managing a portfolio of currencies of the Fed and the buying and selling foreign currencies for foreign central banks.
A Fed spokesman said Mr. Sternlight's departure paved the way for the combination of the foreign exchange and open market desk into a new financial markets group headed by Mr. McDonough.
"Given the announcement of [Mr. Sternlight's] retirement, there was an opportunity for this kind of restructuring," said the spokesman, who asked not to be quoted by name.
But the move is also a response to the globalization of the financial markets, the spokesman added. "It's a natural institutional response to the growing globalization of the financial markets and the interdependency associated with it," the spokesman said.
William N. Griggs, a managing director of Griggs & Santow Inc., a bond market research firm in New York City, said both retirement and the move should not come as much of a surprise to bond market players.
"Peter has been around a long time," Mr. Griggs said. "It sounds to me that with his retirement, they've come up with a different way to organize and take the advantage of the skills of other people."
Mr. Griggs also said the restructuring should not have any immediate effect on the Fed, which places open market operations at the fore-front of its policy decisions given the weak economy.
"But when the condition of the economy is less clear cut, when there's less concern about the economy and foreign policy issues become more important, the reorganization will mean more," Mr. Griggs added.
The Fed also announced that its board of directors promoted Richard G. Davis to executive vice president. Mr. Davis will continue in his role as director of research.
In addition, Roberta J. Puschel will head a new international banking group, the Fed announced. The group combines the Fed's foreign relations area and international examination area.