New Fed governor is just 35

Youngest in history is ex-Bush adviser

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March 29, 2006|By HEARST NEWSPAPERS

WASHINGTON -- At age 35, Kevin M. Warsh is the youngest governor in the Federal Reserve's 92-year history, joining the seven-person board amid grumbling that he's too young and that he's a Wall Street lawyer, not a Ph.D. economist.

Warsh, sitting in his corner office on the second floor of the Federal Reserve headquarters on Constitution Avenue, said he isn't concerned about the critics.

His "real-world experience in boardrooms with CEOs and CFOs" would prove a complementary addition to the Federal Reserve, Warsh said in his first interview since being nominated in January.

"Ph.D.s in economics are important, but what is at least as important is an understanding of the capital markets," Warsh said.

Tom Schlesinger, executive director of the Financial Markets Center, a Howardsville, Va.-based group that monitors the Fed, summed up Warsh's critics:

`To some people the problem is he is young, has rich in-laws and doesn't have a Ph.D. in economics. From those facts some people have argued that Warsh is the newest version of [failed Supreme Court nominee] Harriet Miers."

Bloomberg News on Feb. 10 quoted Preston Martin, a former Fed vice chairman, a Reagan appointee and a Ph.D. economist, as saying, "Kevin Warsh is not a good idea. If I were on the Senate banking committee, I would vote against him."

The next week, Warsh's nomination was approved by the Senate banking committee by a 20-0 vote. He was quickly confirmed by the full Senate.

Warsh took the seat vacated by Ben S. Bernanke, a Ph.D. economist, who's now Fed chairman, succeeding Alan Greenspan, the Ph.D. economist who retired in February.

Robert Scully, co-president of Morgan Stanley - Warsh's former employer - defended his former colleague, saying his Wall Street background makes him a valued addition to the Fed board.

"What is so distinctive and so gratifying to someone like me on Wall Street was that President Bush would select someone with real-life experience in the markets, not someone who was an academic," Scully said. "It is great to have academics, but it is also great to have practitioners."

Warsh grew up the youngest of three children in Loudonville, N.Y., where he excelled at academics and tennis.

That tennis passion and his success on his high school's varsity team led him to Stanford University, known for its excellent tennis program.

At Stanford, Warsh said, he discovered that his competitive tennis skills weren't up to California standards.

"Tennis was more than a passing interest, but I found my ability didn't measure up to these West Coast kids who had played 12 months a year and taken it much more seriously than I," Warsh said.

He majored in public policy, got to know Stanford's then-provost Condoleezza Rice, now secretary of state, and met his future wife, Jane Lauder, granddaughter of cosmetic mogul Estee Lauder.

Warsh graduated from Stanford with honors in 1992 and went on to Harvard Law School, where he graduated cum laude in 1995.

"I was quite convinced that I didn't want to be a lawyer," he said. "But I felt that law school would be a useful way to understand public policy and to understand business in this environment."

He joined Morgan Stanley, working on mergers and acquisitions, and became a vice president of the firm. Warsh was at the Morgan Stanley headquarters on Times Square when the World Trade Center Towers were attacked on Sept. 11, 2001. After his own building was evacuated, Warsh said, he watched one of the Trade Center towers fall.

After that experience, Warsh felt compelled to join government service, he said. So when the White House offered him a job in 2002, he moved to Washington.

Warsh served the Bush administration as special assistant to the president for economic policy. He was also executive secretary of the National Economic Council.

In his Senate banking committee confirmation hearings, Sen. Charles E. Schumer introduced him as "tremendously accomplished for a man his age."

"He knows unequivocally that the Fed must be independent, non-ideological, and nonpartisan, and for this reason, I am proud to support his nomination," the New York Democrat told his Senate colleagues.

Warsh said he didn't know whether to take criticisms about his age as compliments or insults, but said he wasn't focused on the critics.

And neither was retired school teacher Linda Harrison, who taught Warsh's 11th grade advanced placement American history class at his high school in Latham, N.Y., and remains one of his biggest fans.

"That meant nothing to me because I know Kevin will do a great job," she said. "He will be a great success at the Fed. I have absolute confidence he will do a great job."

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