Newest Gnome

Sculptor of dollar diplomacy

The gnomes of international central banking have a new pixie. Under Secretary of the Treasury Anthony M. Solomon, 60, last week was named president of the New York Federal Reserve Bank. World moneymen welcomed the appointment as further support for the battered American dollar.

Early in the 66-year history of the Federal Reserve system, the president of the New York bank was often more powerful than the Washington-based Fed chairman. Because of its location in the nation's financial capital, the New York office carries out day-to-day operations in money markets that determine the international value of the dollar and the level of domestic interest rates. The New York president even earns twice as much as his nominal boss in Washington. Federal Reserve Chairman Paul Volcker, the previous New York Fed president, has taken a cut to $60,700, a salary pegged to that of the highest paid sub-Cabinet members. Solomon will earn about $125,000, an income judged to be a bit closer to that of a private New York bank president.

Solomon sums up his professional life as "one of handling money and men." Son of a New Jersey real estate developer, he studied economics at the University of Chicago before going into Government service. In a vertical-takeoff career, he became by 1943 at age 23 director-general of finance for Allied-occupied southwest Iran, which included that country's strategic oilfields. In the 1950s he launched a powdered soup company in Mexico. After becoming a multimillionaire by selling his firm to General Foods, he began teaching a course in Latin American entrepreneurship at the Harvard Business School. Solomon joined the Kennedy Administration as an economic troubleshooter in 1963 and rose to Assistant Secretary of State for Economic Affairs under President Johnson.

Returning to public office with the Democrats in 1977, Solomon became Treasury Under Secretary and the Carter Administration's tactician in dollar diplomacy. After a stumbling start when he supported a "benign neglect" policy that permitted the American currency to depreciate rapidly in value, Solomon switched strategy in November 1978 to become a strong dollar defender. During the past year he has tried to negotiate the dollar's organized retreat from its role as the world's basic reserve currency by strengthening the powers and reserve assets of the International Monetary Fund. Says he: "None of us are completely sovereign in our domestic economic policies because we are so severely impacted from events abroad." Solomon chose to leave his Treasury job in part because of his growing exasperation with Treasury Secretary G. William Miller, whose easy and loose-talking style contrasts sharply with Solomon's intensity and circumspection. At his first press conference since being named, he showed his taciturn style by refusing comment on routine questions. Both to stem inflation and to strengthen the dollar, Solomon favors high interest rates and slow growth in credit.

Wearing plaid dress shirts, sporting a salt-and-pepper beard and puffing away at a pipeful of Amphora, Solomon looks more like a refugee from a sculpture class than a central banker. In fact, he is. In the two years before taking up his Treasury Department post, Solomon spent full time chipping away at blocks of white oak or molding bronze in his suburban Washington studio. His style in sculpture is modern semiabstract, but in money politics his mode is classic conservative.

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