By Kristina Cooke
NEW YORK (Reuters) - William Dudley, the head of the New York Federal Reserve Bank's markets group, has been chosen to succeed Timothy Geithner as president of the regional Fed bank, a source familiar with the decision said on Monday.
Dudley, 56, has played a central role in the Fed's response to the financial crisis, helping to design, develop and implement the central bank's emergency lending programs.
His elevation to the top job, which opened up when Geithner was approved as U.S. Treasury secretary on Monday, will put him in the forefront of efforts to combat the crisis and pull the U.S. economy out of a year-long and deepening recession.
"The New York Fed is going to need a president who can take a hands-on approach over the next couple of years," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey. "Bill Dudley already has that due to his role in crafting the New York Fed's response to the crisis thus far."
A spokesman for the bank, which earlier had said it would announce its decision on Tuesday, was not immediately available to comment and a spokeswoman for the Fed's Washington-based board declined to comment.
As head of the markets group, Dudley has managed the Fed's system open market account, which executes U.S. interest-rate policy through operations in the bond and money markets. He has also overseen foreign-exchange trading and provisions of account services to foreign central banks.
The role entailed briefing the Fed's policy-making Federal Open Market Committee about market developments. As president of the New York Fed, Dudley will be a permanent voting member on the panel, which meets on Tuesday and Wednesday to consider its next move.
At its last meeting in mid-December, the FOMC lowered its target for benchmark overnight rates to zero to 0.25 percent and said it was focusing its efforts to support the economy on actions to unclog frozen credit markets.
Before becoming the Fed's chief trader in 2007, Dudley was chief economist at Goldman Sachs for 10 years, a role for which he was ranked No. 1 in Institutional Investor magazine's league table of economists several times.
He had joined Goldman Sachs in 1986, working in a number of capacities, including as former Treasury Secretary Robert Rubin's senior economic adviser.
Prior to his years at Goldman, Dudley was in charge of regulatory analysis at J.P. Morgan, where he co-authored a pamphlet that advocated repealing the Glass-Steagall Act, a law put in place during the Great Depression to separate commercial and investment banking. Some economists have criticized the repeal of Glass-Steagall in 1999 as paving the way for the risk-taking that has led to the current crisis.
Dudley began his career as an economist at the Fed's Board of Governors in the early 1980s. He holds a PhD in economics from the University of California at Berkeley.