Monetary Policy

William English's Very Big Job at the Fed


William English, the Federal Reserve economist about to become Chairman Ben S. Bernanke's top monetary policy adviser, has a knack for being in the right place at the right time. As a grad student at Massachusetts Institute of Technology, he counted Bernanke, then a 29-year-old visiting professor from Stanford University, among his teachers. As a Yale University undergrad in 1980, English wandered into the gym where the varsity fencing team was practicing; the sophomore was recruited on the spot because of the competitive edge his 6-foot, 10-inch frame offered.

Now, with the retirement of his boss, monetary affairs director Brian F. Madigan, and Fed Vice-Chairman Donald L. Kohn, who had run the division for 14 years until 2001, the 49-year-old English is about to become one of the central bank's most important players. Much like fencing, the new job requires mental agility, including crafting how and when the central bank will reverse the most expansive monetary policy in its 96-year history without deep-sixing the U.S. economy along the way. The task is "about as challenging as any director of that post has ever had," says former Fed Governor Lyle Gramley, now senior economic adviser at Potomac Research Group in Washington. "Markets have become extremely sensitive to every word the Fed puts out, so a slight mishap and he could send markets for a reel."

Allan H. Meltzer, a historian of the Fed, has faulted the monetary affairs staff for being "far too supportive" of Bernanke's bailouts and emergency loans during the 2008 financial panic, actions that he thinks may have compromised the Fed's independence. "It's a difficult job in the best of times," Meltzer, a professor at Carnegie Mellon University in Pittsburgh, says of English's new post. "And these are not the best of times."

Nicknamed "Big Bill," English takes over monetary affairs as the Fed debates when to start raising its benchmark interest rate from close to zero and how quickly to sell $1.1 trillion of housing debt the Fed bought during the recent crisis. "These are economic issues that academics are going to be thinking about for generations," English said in an interview last month. "I'm sitting in the middle of it, trying to make sense of it in real time."

The youngest of four children, English grew up in West Hartford, Conn., where finance was part of the dinner table conversation. His father, James, was chief executive officer of Connecticut Bank & Trust in the 1970s and served on the Federal Advisory Council, a group of bank executives that advise the Fed.

English will lead a team of about 90 staff members responsible for compiling the confidential Bluebook, which outlines policy choices for the rate-setting Federal Open Market Committee. The team also runs the discount lending window for banks and conducts a quarterly survey of commercial bank lenders.

Helping Bernanke select the right language to signal the pace and timing of a rate change, possibly in the first quarter of 2011, now falls to the new director. The trick is to come up with words that allow maximum flexibility while not surprising investors. At the end of the June 22-23 FOMC meeting, the Fed stuck to its pledge to keep the main rate low for "an extended period," the phrase it has used since March 2009.

The bottom line: A new monetary policy director starts at the Fed just as it debates how and when to reverse the most expansive moves in its history.

Lanman is a reporter for Bloomberg News.

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