Fed Vice Chairman Donald Kohn Resigns

The Fed's second in command is leaving in June. WSJ's take on rats leaving the sinking ship.

Donald L. Kohn, the 67-year-old vice chairman of the Federal Reserve Board who has been a close adviser to Fed chairmen Ben Bernanke and Alan Greenspan, said he will step down from the post when his  term ends in June.

The retirement gives President Barack Obama a third seat to fill on the seven-member Fed board. Daniel Tarullo, a former Georgetown University law professor whom Mr. Obama named to the Fed board last year, is a potential successor to Mr. Kohn as a vice chairman.

But the prestige of the title may be used by the White House to lure someone from outside the Fed to fill one of the vacancies.

"At no time since the Great Depression have this ability and dedication been tested as they have been over the past several years," Kohn said in a letter to Mr. Obama. "I am confident that history will judge the Federal Reserve, under the leadership of Chairman Ben Bernanke, to have met these challenges with great speed, imagination, and effectiveness."

Mr. Kohn was at Mr. Bernanke's side for nearly every critical decision during the financial crisis, serving as the institutional memory of the organization where he has worked for 40 years. And Mr. Bernanke asked him to solve some of the thorniest challenges during the crisis -- from finding a way to melt frozen commercial-paper markets to keeping peace among occasionally warring factions inside the Fed because he was trusted by almost all of them.

"The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service," Mr. Bernanke said. "Most recently, he brought his deep knowledge, experience, and wisdom to bear in helping to coordinate the Federal Reserve's response to the economic and financial crisis. In addition, Don helped lead the stress tests of major financial institutions; he directed the Board's ongoing efforts to increase the transparency of the Federal Reserve; and he has been leading an international effort within the Bank for International Settlements to help central banks focus on key issues and responses to the crisis. On a personal note,  I would like to express my deep appreciation for Don's friendship and counsel during some very difficult times.  He will be greatly missed."