Updated from 11:38 a.m. EDT
Governor Edward Gramlich resigned Wednesday, ending an eight-year tenure with the U.S. central bank that featured consistent vigilance over the federal budget.
The resignation is effective Aug. 31, the Fed said in a release.
The 66-year-old Gramlich's term had been scheduled to formally end in January 2008. Gramlich, who is returning to teaching, was dean of the University of Michigan's School of Public Policy prior to his appointment.
In 2002, the Fed governor received treatment for chronic lymphocytic leukemia.
The news on Gramlich came as questions arose about the future of Fed Chairman Alan Greenspan. Greenspan's current term expires on Jan. 31, but a story in Wednesday's
raised the possibility that the Bush administration might ask him to extend his term by a few months.
Such an extension would give the White House more time to look for a successor, wrote the
Such a development has been deemed unlikely by other observers. But Gramlich's departure serves as a reminder that the Fed is entering a period of flux at a time when the president has proposed significant changes to the Social Security system, the federal budget is running large deficits, and the national savings rate is at a historical low.
Gramlich has been considered a moderate who adhered to Greenspan's anti-inflation agenda in the 1990s. He was particularly strong on public policy matters such as Social Security and the national savings rate. His replacement will be appointed by President Bush.
Formerly, Gramlich served as chief of the Congressional Budget Office and headed an advisory commission on Social Security that failed to reach consensus on how the system can prepare for the wave of baby boomers nearing retirement. He urged privatizing the fund but leaving the government in administrative control of mandatory, worker-owned individual savings accounts that he recommended for supplementing benefit checks.
He will return to the University of Michigan after leaving the Fed.
"Ned has contributed powerfully to the work of the Board and of the FOMC for nearly eight years," Greenspan said in a statement. "Our deliberations have been enriched by his keen insights, his good humor and his lively mind."