Wonks in action: Philly Fed re-boots research

"What the Fed does and how we do it is a mystery to a lot of people," admits Patrick T. Harker, the former Wharton School dean and UDelaware President who heads the Federal Reserve Bank of Philadelphia.

He spoke today before reps of 7 of the 11 other regional Federal Reserve Banks and others "policy geeks," as he called them, gathered in a Society Hill hotel for the community-development conference Harker's bank sponsors each year.

The Fed has "limited" tools, Harker reminded his audience. It doesn't set the federal budget or raise taxes. It does (1) monetary policy -- interest rates -- to try and meet Congress' mandate of keeping price and employment levels steady.

Plus (2) under the 1977 federal Community Reinvestment Act the regional Feds require banks that want to merge -- which is most of them, sooner or later -- to finance borrowers and projects in poor neighborhoods, as well as rich ones.

The Philadelphia district has long taken CRA seriously. It has a community-development staff and some of its dozens of staff economists, among their duties, review community-development programs and policies. The bank also "brokers," as Harker puts it, projects and programs that address its goals of credit and workforce improvements, to potential bank, industry and foundation funders.

Harker wants this research to reach more people. "Aside from my personal view that we have a moral imperative to ensure that everyone has a fair chance at success, there's a practical argument as well," Harker said:

When poor people prosper, employers have more effective workers, the people spend less on prisons, citizens can more easily participate. .  "The investments we make now to alleviate poverty — be they pre-K education or adult skills training — will come back to us all," Harker added. "We're helping to create the next workforce, the next engine of the American economy, the next wave of educators and engineers. Not to mention the people who'll be contributing to the economy — and our Social Security — when we've all retired."

So, what's new: "The Philadelphia Fed will be leading an effort to bring national attention to poverty and the ways in which it influences economic growth and prosperity.

"We're calling it the Agenda on Poverty & Prosperity, an intensive research initiative to better understand how poverty affects the economy, to inform policymakers, and to use our findings to promote economic mobility.

"We will sponsor work on inclusive growth, tapping the nation's best economic minds and research and pairing them with lessons gleaned from practitioners' on-the-ground experience.

"We'll conduct and share research, host an online information and data tool for the public, and inform Federal Reserve System leadership about our findings.

"We'll be encouraging investment in strategies that promote development and inclusion.

"Over the next three years, we will host a series of Economic Research in Action Labs. Top economic researchers will present their findings to leaders from the public, private, nonprofit, and philanthropic sectors in our District to help inform policy solutions.

"Finally, we will continue to reach out to private sector partners for their thoughts, and, of course, their resources, connecting them to practitioners who can put them to use.