WASHINGTON - E. Gerald Corrigan, the plain-talking, hard-charging, president of the Federal Reserve (Bank of New York, announced yesterday that he will resign this summer to join the private sector after 25 years with the central banking system.
The announcement by Corrigan, 51, at a New York news conference, caught the bond market by surprise. However, analysts said they did not expect the resignation, which takes effect Aug. 20, to have much of an impact on monetary policy.
Corrigan, who has a permanent seat on the Federal Open Market Committee in his capacity as president of the New York Fed, rarely dissented in decisions on interest rate policy. At the same time, he was viewed as a strong personality with a keen technical understanding of the interplay between banking and monetary policy issues.
"The Fed is losing one strong intellectual force," said Stephen Axilrod, vice chairman of Nikko Securities Co. International and a former staff director of monetary and financial policy at the Fed who knew Corrigan when he worked for former Chairman Paul Volcker.
Corrigan said he has not yet begun his search for work in the private sector and wanted to announce his resignation well in advance to provide for an "orderly, smooth transition." His Fed experience and extensive international contacts are expected to bring a substantial improvement on his current salary of $257,700.
Corrigan said he was not resigning because of any policy problems. "What you see is what you get," he told reporters. "There is no hidden story. There is no hidden agenda."
Corrigan, who earned a reputation for tireless devotion to duty, said he is looking forward to a new career in which he will have to work only six days a week instead of seven. He said he regrets leaving and hopes to have a successor named by July 1, if not sooner.
Ellen V. Futter, head of the New York Fed's board of directors, said in a separate statement that the board had appointed a search committee that has already begun work to find a successor.
The departure of Corrigan will mark another of several changes on the FOMC. Jerry Jordan has joined the Fed as president of the Federal Reserve Bank of Cleveland and Robert Black resigned on Jan. 1 as president of the Federal Reserve Bank of Richmond.
Federal Reserve Board Chairman Alan Greenspan, in a statement, said Corrigan will be missed by the Federal Reserve System. "His contributions to monetary and financial policy, to banking supervision and regulation, and to international cooperation and coordination-... are legion," Greenspan said.
Before his appointment to the New York Fed on Jan. 1, 1985, Corrigan was president of the Minneapolis Federal Reserve Bank for four and a half years.
In July 1991, he was named chairman of the Basle Committee on Banking Supervision, the panel of central bankers set up by the United States and nine other industrial nations to provide regular cooperation on banking supervisory matters. As chairman, he had a major role in the drawing up of the new risk-based capital standards for banks that took full effect last month.
Corrigan was also instrumental in establishing a Russian-American Banking Forum, which was set up last June to assist Russia in developing its banking and financial system. According to one source, Corrigan won the trust and confidence of Russian President Boris Yeltsin.
In wide-ranging comments at the news conference, Corrigan repeated his long-standing opposition to legislation reintroduced yesterday by Rep. Henry Gonzalez, D-Tex., to reform the Fed. "Anything that carries with it the danger that the Federal Reserve will become politicized should be strongly resisted," he said.
Corrigan suggested that the ballooning federal deficit should be the next subject for U.S. economic attention, now that inflation is under control. "I do regard a systematic effort to wind down the budgetary deficit as one of our great challenges," he said, predicting that the deficit would be "stubbornly stuck" at 4% of gross domestic product by 1997 without a change of course.
He said that while he has had contacts with officials in the Clinton administration, "I made it clear I had no desire to be involved with that administration or any administration in a systematic fashion."
Corrigan joined the New York Fed in 1968 as an economist in the domestic research division. He moved up through a number of positions until 1979, when he became a special assistant to Volcker in Washington.
He was back at the New York Fed in 1987 as president when the stock market crashed, an event in which he played a major role in making sure brokers and other financial firms had enough credit to avoid a liquidity crisis.
"I think he is one of the more respected FOMC members," said David Wyss, senior vice president of DRI/McGraw-Hill Inc. "He has a good understanding of how the money market and the bond market work."
Dean J. Patterson contributed to this article.
