|
New Fed bank president plans to do street-level research
by
Jack Milligan
Virginia Business
February 2005
If
ever there was an edifice in Richmond that fits the
description of an ivory tower, it’s the Federal
Reserve Bank, which towers over the city’s downtown
and is filled with research economists, those beady-eyed
practioners of the “dismal science.” One
of those economists is Jeffrey M. Lacker — who
took over as the Richmond Fed’s new president
last August — and contrary to what you might expect,
Lacker will do a lot of research at street level.
Lacker,
previously the bank’s director of research, replaces
the highly respected J. Alfred “Al” Broaddus
Jr., who retired after 11 years on the job. As with
Broaddus, a big part of Lacker’s job will be to
get around to all parts of the Richmond Fed’s
turf in the Fifth District — which includes Virginia,
Maryland, the Carolinas and most of West Virginia —
and talk to ordinary people about what’s [going]
on in their communities.
District banks like the one in Richmond (there are 12
in the Federal Reserve System) are responsible for collecting
economic data from their regions. That information is
funneled to the Federal Reserve Board in Washington
where it influences the setting of interest rates. But
the kind of street knowledge you get from talking to
local business people can also be a tipoff to new economic
trends long before they show up in the official data,
and so a big part of Lacker’s job will be to hit
the rubber chicken circuit. He made his first speech
last December at the Charlotte Chamber of Commerce (in
which he said national economic trends look good), and
afterward spent time chit-chatting with some of the
local folk.
“It takes several months to get an accurate national
statistical sense of what’s [happening], but by
talking to people at the local level you can get a sense
of what’s going on in people’s minds —
whether business is picking up or slowing down, or whether
they’re holding back for any particular reason
from investment spending or hiring,” says Lacker.
Getting out among the people enables him to hear about
things “anecdotally before it leaves a trace in
the data, before it’s discernable in a way that
you can hang your hat on statistically,” Lacker
adds.
A native of Lexington, Ky., the 49-year-old Lacker graduated
from Franklin and Marshall College in Lancaster, Pa.,
and attained a doctorate in economics from the University
of Wisconsin. He joined the Richmond Fed in 1989 as
an economist and eventually became a senior vice president
and director of research in 1999. His personal interests
are many and varied. He enjoys hiking and backpacking,
and says the most beautiful spot he has every visited
is Kluane National Park in the Yukon, which he traversed
with a friend in 1977. “We had a bear visit us
for lunch,” he laughs. He also serves on the Maggie
L. Walker Governor’s School Advisory Board, the
board of the Richmond Jewish Foundation and the Advisory
Board of Junior Achievement. Ask him what he would do
if he won $50 million in the lottery and his eyes twinkle:
“Get a Ph.D. in medieval history and buy a Porsche
Carrera.”
Thanks to his professional and educational background,
Lacker comes to his new job prepared to participate
in monetary policy discussions at the Federal Open Market
Committee, which meets eight times a year to set interest
rates. (He won’t become a voting member until
2006, but he will participate in the committee’s
deliberations.) But district banks in the Federal Reserve
System perform a variety of duties including the processing
of paper checks and digital payments, providing storage
for currency and coins and supervising commercial banks
in their territory. Lacker now runs a large regional
enterprise with approximately 2,500 employees working
at the Richmond headquarters, branch offices in Baltimore
and Charlotte and check processing centers in Charleston,
W.Va., and Columbia, S.C.
Boston Fed President and Chief Executive Officer Cathy
E. Minehan says every new president has a steep learning
curve regardless of their background simply because
the banks themselves play such a diverse role. “There
isn’t a single person who becomes a Fed president
who doesn’t have to do a lot of homework,”
she says. The same requirement applies to Lacker.
But Fed presidents also have the opportunity to develop
distinct reputations for their institutions, largely
through their research efforts. For example, under Minehan
the Boston Fed has performed groundbreaking studies
on housing and fair lending issues. Lacker wants the
Richmond Fed to focus on raising the “financial
literacy” of people within the district so they
have a better understanding of monetary policy. And
he has a personal interest in how the Federal Reserve
approaches monetary policy during times of financial
crises. A research paper he published in 2003 concluded
that the Fed did a good job of handling the post-9/11
crisis by pumping massive amounts of liquidity into
the financial system but the Fed also was fortunate
that the banking system was in good shape.
“We did a very good job of that, [but] looking
back over the experience I think there are ways in which
we can improve how we manage and how we prepare for
the next crisis,” Lacker says. “It’s
never a matter of if it’s going to happen, just
a matter of when.”
Return to Virginia Business - February 2005 |
