A look inside the 'policy-nerdy' Fed
"What the Fed does and how we do it is a mystery to a lot of people," Patrick T. Harker, the president of the Federal Reserve Bank of Philadelphia, reminded scholars and practitioners Friday at the bank's yearly community-development conference in Society Hill.
"What the Fed does and how we do it is a mystery to a lot of people," Patrick T. Harker, the president of the Federal Reserve Bank of Philadelphia, reminded scholars and practitioners Friday at the bank's yearly community-development conference in Society Hill.
The Federal Reserve doesn't set the federal budget, or taxes, debts, or deficits. Its Board of Governors does set monetary policy, targeting interest rates to keep prices and employment steady.
Those interest-rate targets have spawned divisions recently within the Fed.
Chair Janet Yellen and other Washington and New York members have favored cheap money that benefits Wall Street and foreign trade. Regional Fed officials like Harker have favored higher rates that benefit retirement savers and community banks.
Besides the central Fed's monetary policy, the regional Feds use the 1977 federal Community Reinvestment Act to push lenders to finance loan programs, job-training projects, and other investments in poor neighborhoods.
The Philadelphia Fed uses CRA to "broker" foundation and agency support for loan programs, housing, job-training, and other projects focused on giving more families opportunities to live better.
In a group discussion, Harker and two of the 11 other regional Fed presidents - Loretta Mester of Cleveland and Dennis Lockhart of Atlanta - talked about the importance of the Fed's political independence, scholarly collegiality, and wonkish dependence on data and facts. But they admitted they have to do a better job reaching Americans.
"It's really apolitical. Policy-nerdy," said Mester, a former research chief at the Philadelphia bank. "It's science, but it is also judgment. We talk. We express our views. That's how good policy is done."
Done, too often, "in a bubble" isolated from the public, said Lockhart: "The lesson of this electoral season is that there are people who believe the elites don't care, and don't work for an inclusive economy."
It's no wonder many Americans "have lost trust in institutions that can do good," Mester said. There's a "mistrust of facts. We need sound analysis. Nuanced."
For example: "We know an economy with free trade is better" for consumers, who make up two-thirds of the U.S. economy, Mester said. But free trade also means some lose their jobs or businesses, she added. "How do you bring up the person who may be left behind?"
"We need to communicate to a much larger group of people, on the ground, with a constant dialogue, and a much more appropriate communications strategy," Harker said later.
He wants to expand the vast research Fed economists conduct on poverty, job prep, and personal mobility, to conduct more hands-on research - and bring it home to more employers, voters, and underemployed people trying to figure out their own paths and opportunities.
Harker picked the gathering to announce an "Agenda on Poverty and Prosperity," an "intense research initiative to better understand how poverty affects the economy, to inform policymakers, and to use our findings to promote economic mobility." He plans a string of "Economic Research in Action Labs, to "help inform policy solutions" in digital America.
It's no use waiting "for the resurgence of an economy long past," Harker concluded.
215-854-5194@PhillyJoeD