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April 4, 2014

Fed Governor Stein Resigns to Return to Teaching at Harvard

“Federal Reserve Governor Jeremy Stein, a thought leader on the linkage between monetary policy and financial stability, resigned from his post to return to teaching economics at Harvard University.”

“Stein, 53, will leave May 28 after two years as a governor, according to a statement by the Fed today in Washington. His return to Harvard, which doesn’t extend leaves beyond two years, creates a vacancy for his term ending Jan. 31, 2018.”

“Stein departs amid growing concern among policy makers that more than five years of near-zero interest rates and trillions of dollars in bond purchases may give rise to financial instability.”

“He had the intellectual heft to speak with authority on financial-market issues and macroeconomic issues, highlighting the potential risks” from quantitative easing, said Antulio Bomfim, senior managing director at Macroeconomic Advisers LLC in Washington. “He was a very influential guy. It is a loss for the Federal Open Market Committee and the Board.”

“Bomfim added that Stein’s resignation wasn’t surprising given Harvard’s restrictions on leave.”

“In speeches, Stein described an approach to financial bubbles that included raising interest rates, breaking with colleagues who said supervisory tools should be the first line of defense. While former Chairman Ben S. Bernanke elevated financial-stability concerns, the Fed’s strategy on how and when to manage excess in markets remains unfinished.”


Read full Bloomberg article here.

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