Fed Governor Mishkin Resigns

Federal Reserve governor Frederic Mishkin resigned Wednesday, leaving the central bank's board even more short-handed in the midst of Wall Street's credit crisis.

Mishkin plans to step down at the end of August and return to teaching at Columbia University's business school, where he has been on leave since his appointment to the Fed in September 2006. His departure will leave the central bank with only four Fed governors, while it normally has seven.

The Fed is short-handed because Senate Finance Banking Committee Chairman Chris Dodd (D., Conn.) has not held votes to confirm candidates appointed by President Bush to fill the board's empty seats. Fed governors are nominated by the president and confirmed by the Senate for a 14-year term.

Mishkin provided no explanation for his departure in a letter to President Bush.

In his short tenure at the central bank, Mishkin has presided over historic tumult in the U.S. financial system that drove the Fed to take extraordinary measures. In March, the Fed aided the fire sale of Bear Stearns (BSC Quote), the nation's fifth-largest investment bank, to JPMorgan Chase (JPM Quote), and it made extended emergency credit available to other investment banks, including Merrill Lynch (MER Quote), Citigroup (C Quote) and Lehman Brothers (LEH Quote).

Mishkin's absence on the Fed's board will not prevent the central bank from taking similar action in the future, due to rules enacted following the terrorist attacks of Sept. 11, 2001. Four votes are now required for such actions.

The Fed has also lowered its key short-term interest rate target by 325 basis points since the outbreak of the credit crisis last summer in a series of decisions by its Federal Open Markets Committee, which includes all Fed governors and five of the 12 regional reserve bank presidents. While two Fed governors have abstained from the majority in the last two Fed decisions to lower interest rates, Mishkin's departure is unlikely to affect the voting dynamic.