WASHINGTON - President Bush announced Tuesday that he will nominate former community banker and Senate Banking Committee aide Mark Olson to the Federal Reserve Board.
The president of his family's Security State Bank in Fergus Falls, Minn., until its sale in 1988, Mr. Olson is the second banker in a month the White House has selected for the seven-member board. Susan Schmidt Bies, executive vice president of First Tennessee National Corp., was nominated in June. They would be the first financial services industry executives to serve as Fed governors since John P. LaWare resigned in 1995.
"It will be great to have two bankers on the board, particularly one who is a community banker," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "There ought to be real live bankers on the Federal Reserve Board. We made that argument very strongly to the White House, and were pleased," he said, when administration officials were receptive.
Mr. Olson, who was president of the ABA from 1986 to 1987, ran Security State Bank until the then $35 million-asset institution was bought by Paul Lindholm 13 years ago. A Minnesota native, he began his career as a loan officer at what is now U.S. Bancorp, and later became a partner at Ernst & Young LLP, where he ran the consulting firm's financial services regulatory practice until 1999. Instead of going into retirement, the 58-year-old joined the staff of former Sen. Rod Grams, R-Minn., as staff director of the Senate Banking securities subcommittee.
Capitol Hill sources said Mr. Olson is respected by staff members on both sides of the aisle for his real-world banking experience and for what they describe as a kind and thoughtful manner. His hallmark issue, which he first took on as the banking aide in the early 1970s for Rep. Bill Frenzel, R-Minn., was modernizing banking laws.
Supporters defended Mr. Olson as strong on public policy issues, attributing zings asserting the opposite to his friendly Midwestern manner - or to sour grapes by backers of rival candidates for the Fed slot.
"He'll be able to upgrade the board's expertise on supervisory issues, which the board has traditionally relied on staff" to handle, said Joseph L. Seidel, a lobbyist for Credit Suisse First Boston and a former House Banking Committee aide. If confirmed, Mr. Olson and Ms. Bies will fill the two vacancies on the seven-member board. The White House will have the opportunity soon to nominate a third member when Fed Governor Edward W. Kelly Jr. resigns. Mr. Kelly announced last month that he would leave the board as soon as one of the vacancies is filled.
Fed watchers say the nominations of Mr. Olson and Ms. Bies reduce the chances that another banker will be named to the board, which is required by the Federal Reserve Act of 1913 to "have due regard to a fair representation of the financial, agricultural, industry and commercial interests, and the geographical divisions of the country."
With his background as a community banker from an agricultural state, Mr. Olson satisfies the need for a representative of farm and small-business interests. As a result, the chances are slim that the White House will nominate as Mr. Kelley's successor Terry Jorde, the president and chief executive officer of $34.6 million-asset CountryBank USA in Cando, N.D., who hails from the same region as Mr. Olson. House Majority Leader Richard Armey, R-Tex., a Cando native, and the Independent Community Bankers of America have lobbied the White House on her behalf.
More likely, Mr. Kelley's Dallas job will be filled by someone who comes from a business background, like Mr. Kelley.
Another banker sources have said is on the short list for that seat is Alfonso Martinez-Fonts Jr., the Cuban-born chairman and chief executive officer of J.P. Morgan Chase Bank of Texas in El Paso. Though Mr. Martinez-Fonts' profession as a banker now might not be an advantage to getting on the board, he does have strong business ties as a former president of the Greater San Antonio Chamber of Commerce and activist for establishing free trade in North America.
Separately on Tuesday, the White House formally nominated Harvey L. Pitt, a veteran securities lawyer with the firm Fried, Frank, Harris, Shriver & Jacobson, as chairman of the Securities and Exchange Commission. President Bush made his intent to nominate Mr. Pitt public in early May.