WASHINGTON — Federal Reserve board member Kevin Warsh, who helped engineer the central bank's strategy during the financial crisis, will step down near the end of March.
Warsh has served at the Fed since 2006. President George W. Bush tapped him for the post when he was 35 years old, making him the youngest person to serve on the Fed's seven-member board.
Warsh has voted largely with Fed Chairman Ben Bernanke. Warsh supported the Fed's $600 billion bond-buying program despite reservations about how much it would help the economy and concerns that it could spur inflation.
His departure will create a second vacancy on the board, allowing president Barack Obama to enlarge his imprint.
Obama has appointed four of the board's seven members. The president has re-nominated Nobel Prize-winning economist Peter Diamond to fill the existing vacancy but Senate Republicans have blocked his confirmation.
Before joining the Fed, Warsh was a special assistant for economic policy to President Bush. Before that, he was an executive at Morgan Stanley & Co., in the mergers and acquisitions department.
His background on Wall Street and his knowledge of Washington were critical when the 2008 financial crisis hit. Warsh worked closely with Bernanke to formulate the Fed's response, which including new programs to make lending flow more normally again.
Warsh also helped arrange JPMorgan's takeover of failing investment firm Bear Stearns and the government's bailout of insurance giant American International Group, both in 2008. He was involved in negotiations over Lehman Brothers, whose failure caused a panic on Wall Street and financial markets around the globe. Fallout from the company's failure caused credit to virtually dry up and pushed the country deeper into recession.
"He worked energetically and effectively behind the scenes overseeing the operations of the board and the Federal Reserve System," Bernanke said. "I deeply appreciate his insights and wise counsel and, most especially, his fortitude and friendship during the difficult days, nights and weekends of the crisis."
Warsh submitted his resignation to Obama on Thursday.
"I am honored to have served at a time of great consequence," Warsh wrote the president.
Obama will be in charge of nominating Warsh's replacement, which requires Senate confirmation.
The president will need some Republican support for his pick, and he's likely to choose a candidate with a Wall Street background, to fill the void left by Warsh.
Obama ran into initial resistance in his effort to get Bernanke, a Republican, confirmed for a second term as chairman in late 2009. Republicans led the opposition, upset over the Fed's role in bailing out Wall Street firms during the financial crisis. In January 2010, the Senate confirmed Bernanke for a second term, though by the narrowest margin for any Fed chairman.