Fed Vice Chairman Donald Kohn occasionally commutes by bicycle. His parking place in the Fed garage. Federal Reserve Board


The opportunity comes at a delicate moment. The Fed is under political attack for its failure to prevent the financial crisis and the way it helped bail out the banks, and it is confronting the task of deciding when and how to raise short-term interest rates and drain the extraordinary amount of credit it pumped into the economy.

If Mr. Obama and the Senate move swiftly—and the White House press secretary, Robert Gibbs, said Monday that the president hopes to have a successor to Mr. Kohn confirmed by June—new Fed governors could influence the timing of the Fed's eventual move to raise interest rates. "It's almost inconceivable that the [policy-making Federal Open Market] Committee will become more hawkish," said Laurence Meyer, a former Fed governor. In Fed jargon, hawks are those more worried about inflation and more eager to raise rates.

Adding three Obama appointees also could influence the stance that the Fed takes on issues beyond interest rates from the strength of consumer-protection rules to the size and powers of the nation's biggest financial institutions, provided Congress continues to give the Fed the task of regulating them.

But Chairman Ben Bernanke's clout inside the Fed remains significant, and new board members usually don't challenge the chairman, at least initially. Moreover, presidents of the 12 Federal Reserve regional banks—who aren't political appointees—can serve as a counterweight to the Fed governors in Washington.

Donald Kohn at a Symposium on Interest Rate Risk Management in Arlington on January 29. Reuters

Daniel Tarullo, a Georgetown University law professor named to the Fed last year, has been mentioned as a potential successor to Mr. Kohn as a vice chairman, but he is said to prefer concentrating on the overhaul of the Fed's bank supervision.

The White House has been looking to add an economist to the board, as well as a person versed in financial markets. Insiders say the combination of a cut in pay for some potential nominees and the intense vetting and Senate confirmation process has discouraged some possible candidates. Mr. Kohn's departure will leave just one economist, Mr. Bernanke, on the Fed board. Among potential economist candidates are Christina Romer, who chairs the White House Council of Economic Advisers (CEA); Janet Yellen, president of the Federal Reserve Bank of San Francisco; and Austan Goolsbee, a current CEA member.

Mr. Kohn, 67 years old, 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. Mr. Bernanke assigned him some of the thorniest challenges in the crisis—from melting frozen commercial-paper markets to keeping peace among warring factions inside the Fed and among federal bank regulators.

"The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn," Mr. Bernanke said. "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."

Mr. Kohn joined the Federal Reserve Bank of Kansas City staff in 1970 before finishing his doctorate in economics at the University of Michigan. He came to Washington in 1975 and worked his way up the ranks to oversee the Fed's influential monetary-affairs unit in the Greenspan years.

President George W. Bush appointed Mr. Kohn to the Fed board in 2002 and promoted him to vice chairman in 2006.

Mr. Meyer, the former Fed governor, has called Mr. Kohn "the most important non-chairman member of the board in the history of the Fed."

Mr. Obama has named one Fed governor, Mr. Tarullo, and renominated Mr. Bernanke for a second term as chairman. With some hesitation and much criticism, the Senate confirmed Mr. Bernanke 70-30 in January.

Members of the Fed board are named to 14-year terms by the president; the chairman and vice chairman serve four-year terms. Mr. Kohn's term as vice chairman expires June 23. His term as a Fed governor extends to 2016; his successor will serve out the remaining years.

The other Bush appointees to the Fed board are Kevin Warsh, a lawyer and former investment banker, and Elizabeth Duke, a former commercial banker. The Fed governors in Washington join the presidents of the 12 regional Fed banks in making monetary policy. Members of the Fed board earn $179,700. The chairman earns $199,700.

For decades as a Fed staffer, Mr. Kohn's most prominent moments were showing up on TV sitting behind Mr. Greenspan as the Fed chairman testified on Capitol Hill. After becoming a Fed governor, Mr. Kohn raised his public profile, responding at one hearing, for instance, to congressional complaints that the Fed was being too stingy with details of the counterparties who benefited from the rescue of the American International Group Inc. After that testy exchange, the Fed agreed to provide more information.

When he lived in Virginia, Mr. Kohn used to ride to work on a bicycle with the pants of his gray suit tucked into his black socks, parking the bike in the spot in the Fed garage reserved for his car. He currently splits his time between a weekend house in Annapolis, Md., and an apartment in his son's basement in a Maryland suburb.

Among other central bankers, he is known for hikes he leads at the Fed's annual summer conclave at Jackson Hole, Wyo., that are so strenuous that some call it the "Don Kohn Death March."

Write to David Wessel at capital@wsj.com and Jon Hilsenrath at jon.hilsenrath@wsj.com