N.Y. Fed Loses Top Officers Including Potter in Rare Double Exit

(Bloomberg) -- The Federal Reserve Bank of New York said two of its top officers are departing -- including Simon Potter, who oversees its strategically vital trading desk -- in a rare double exit from the senior ranks of the U.S. central bank.

Potter and fellow executive vice president Richard Dzina, who ran the bank’s financial services group, will both step down effective June 1, the bank said in a statement Tuesday. It will launch a search to find their successors.

Their departures -- which between them take almost 50 years of New York Fed experience with them -- come about a year into John Williams’s tenure as president of the bank.

Potter had been seen in some quarters as a potential contender to take the helm in New York before Williams, who was then head of the San Francisco Fed, won the pick. The New York Fed is the most important of the 12 regional Fed banks because of its oversight of Wall Street and execution of monetary policy via the desk that Potter ran. The head of the New York Fed also wields a permanent vote on the central bank’s interest rate-setting Federal Open Market Committee and is the panel’s vice chair.

Dzina did not immediately respond to a request for comment. Potter referred questions to the New York Fed.

The abrupt departures come at a delicate time for the central bank as it finishes shrinking its balance sheet. The wind-down process, which Potter oversees as the head of the New York Fed’s markets group, will end later this year but policy makers have yet to decide important questions on the long-term maturity composition of its bond holdings.

Short Notice

“I’m very surprised that both of them would do this on the same day with three days’ notice,” said Tom Simons, a senior economist at Jefferies in New York. Simons said Potter’s job, as head of the central bank’s open-market operations, is “arguably more important than being president of the some of the regional Fed banks.”

He said the departures are especially worrying for market participants given the uncertainty hanging over the New York Fed’s plan, in conjunction with the U.S. Treasury, to replace the scandal-tainted London InterBank Offered Rate with a new dollar-based benchmark rate, known as the Secured Overnight Financing Rate.

Potter had been scheduled to give a speech in Hong Kong on May 30 on the transition from Libor. He now won’t deliver those remarks, said New York Fed spokesman Jack Gutt.

Potter took the helm of the markets group -- which is responsible for implementing policy decisions about interest-rate changes and constitutes the central bank’s eyes and ears on Wall Street -- in June 2012. Over the last seven years, he’s overseen the Fed’s exit from years of zero rates and bond purchases that swelled the balance sheet to as much as $4.5 trillion at its peak.

Lou Crandall, chief economist at Wrightson ICAP in New York, played down the drama of Potter’s exit. “There is never going to be a good time. He stayed for a nearly a year after John Williams’s term began, which created considerable continuity,” he said.

Williams in the statement praised the contribution both men have made to the New York Fed and in particular the “depth and breadth of talent they’ve nurtured at the bank.” Potter’s number two, Lorie Logan, was quickly viewed as a contender to take over his role.

--With assistance from Michael McKee, Craig Torres and Alexandra Harris.

To contact the reporters on this story: Matthew Boesler in New York at mboesler1@bloomberg.net;Christopher Condon in Washington at ccondon4@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alister Bull

©2019 Bloomberg L.P.