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Understaffed Fed raises worries

With a retirement this summer, the central bank will have just four of seven board seats filled.

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Just when the economy most needs the help of capable policymakers, America's central bank finds itself short-staffed.

The predicament: Where the Federal Reserve is supposed to have seven members on its board of governors, it now has five. A recently announced retirement, moreover, means that by late summer the number is set to drop to four.

Compared with things like the price of oil or subprime mortgages, this doesn't qualify as a crisis. But the Fed is the first line of defense against such threats – inflation and the financial fallout of house-price deflation.

The case of the missing governors may be larger than just the board's ability to perform its tasks at an important time. Since it stems from Senate inaction on nominees, it is possible that political tensions surrounding the central bank are growing.

"The logical thing to do is to fill these positions," says William Poole, former president of the Federal Reserve Bank of St. Louis. "It should not wait…. You could end up in a critical situation, where you ended up through resignation or illness with a board that only had two or three people."

Fed-watchers and people such as Mr. Poole, who have sat on the Fed's policymaking committee, say a fully staffed board serves two vital functions: It adds to the range of professional opinion around the Fed's voting table and it helps ensure that the board doesn't fall behind on administrative and regulatory duties.

"We need as much horsepower as we can get" on the board, says Kenneth Thomas, a Fed expert at the University of Pennsylvania's Wharton School. "This is taking a V-8 [engine] down to a V-6 and maybe even a V-4."

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