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Rivlin resigns as Fed's No. 2
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June 3, 1999: 8:35 p.m. ET
Departure of Rivlin, a Clinton stalwart, is not expected to ruffle markets
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NEW YORK (CNNfn) - Alice Rivlin, the No. 2 official at the Federal Reserve Board, announced Thursday she will resign next month to return to a top think tank.
Market watchers said the sudden departure of Vice Chair Rivlin, the first woman to reach a Fed post that high, is not expected to ruffle markets. In three years on the Fed, she never dissented from the majority on interest-rate policy votes.
Rivlin, like many other Fed governors under the shadow of Chairman Alan Greenspan, was a moderate known for her pro-growth view on economic matters and a "dove" on inflation, as opposed to those eager to raise interest rates.
Rivlin "would agree that Alan Greenspan is the acknowledged leader of monetary policy," said Peter Kretzmer, an economist at Banc of America Securities LLC in New York.
The Federal Open Market Committee last month announced it is leaning toward a hike in short-term interest rates.
Since the Fed changed its bias, there have been unrelenting signs of strength in the U.S. economy, raising investors' fears that the Fed will raise rates at its next meeting on June 29-30.
While Rivlin's resignation doesn't take effect until July 16, she already has decided not to attend the June FOMC meeting.
Some experts say Rivlin's absence could tilt the balance in favor of inflation hawks. However, David Resler, managing director at Nomura Securities International and a former St. Louis Fed economist, disagreed.
"She'll be missed because she is an outstanding economist. But her absence will not alter the course of monetary policy or of the decision the FOMC will take on June 30," Resler said.
"As far as markets are concerned, this is a non-event. The market will absorb news of Rivlin's departure as fast as it did Rubin's," he added, referring to the recent resignation of Treasury Secretary Robert Rubin.
Rivlin plans to return to the Brookings Institution, a Washington, D.C.-based think tank, where she will become senior fellow in its economic studies program. It will be her fourth stint at Brookings.
Praise from Clinton, Greenspan
In a statement, Fed Chairman Greenspan said: "I am extraordinarily grateful to Alice Rivlin for her many contributions to the Federal Reserve."
Greenspan credited her work in the Fed's budgeting process and developing electronic payment systems -- and contributing "common sense" in Fed parlays amid international market crises over the past two years.
In her resignation letter to President Clinton, Rivlin said she will devote more time to the D.C. Financial Assistance Authority, which was appointed to run the capital's finances in 1995 after it nearly went bankrupt.
"Indeed, I hope to spend more time and to be more effectively involved in the city than I have been able to be at the Fed," Rivlin wrote.
Prior to joining the Fed in June 1996, Rivlin was director of the Office of Management and Budget under Clinton, who said she served his administration "with integrity and distinction."
"I am sorry to hear that Alice Rivlin is stepping down as Vice Chair of the Federal Reserve," Clinton said in a statement. "For many years, Alice has been a steady and strong voice for fiscal discipline, and she deserves much credit for helping usher in a new era of budget surpluses."
The resignation brings to two the number of vacancies on the Fed's seven-member Board of Governors, after Susan Phillips stepped down in June last year. The administration has not yet named a replacement for Phillips.
-- from staff and wire reports
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