Federal Reserve Chairman Ben Bernanke may get all the headlines, but the retirement of Vice Chairman Donald L. Kohn is giving President Barack Obama the historic opportunity to reshape the nation’s central bank. Kohn is one of seven Fed governors who set U.S. monetary policy and regulate the financial system.

The change comes at a time of historic transformation and intense examination of the Fed and its mission.  Over the past 18 months, the Fed has taken extraordinary steps to recue the nation from the worst financial crisis since the Great Depression and stabilize the economy.  The Fed has now reached the point where it must decide how and when to relax some of its emergency actions.  The Fed’s governors also must transform their regulatory approach to prevent future financial crises.  They also must avert attempts by Congress to enact greater monetary policy oversight and take away the Fed’s ability to supervise banks.

Potential candidates for the job include Christina Romer, Council of Economics Advisers Chairman, and Janet Yellen, President of the Federal Reserve of San Francisco.  Kohn, who has been with the Fed for 40 years, will take with him much of the central bank’s institutional memory.  Additionally, Kohn received high praise from his boss.  According to Bernanke, “The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service.”

“It’s a pivotal point in the history of the Fed,” says Diane Swonk, chief economist at Mesirow Financial.  “You need somebody who has credibility and can defend the Fed’s independence in a way that doesn’t offend Congress.  They need finesse on regulatory policy.  There will be a lot on their plate.”