In the Federal Reserve's 82-year history, 74 people have had the
privilege of serving on the Board of Governors. This group has played
an important role in fostering the nation's economic growth. We
invited former Board members to reflect on their experience and
share their thoughts on current monetary policy direction as well
as career highlights after leaving the Board. We published the responses
of several former governors in the September
issue of The Region and now continue that dialogue.
We posed the following questions:
- What have been some of the highlights of your career
since leaving the Board?
- What are your views on the Fed's strong emphasis on price stability in
recent years?
- As you reflect on your tenure as a Federal Reserve governor, what was
your most memorable experience?
- With Chairman Greenspan's term expiring next March, what advice would
you give to the new chairman whether it is Greenspan or someone else?
J. Dewey Daane
1963-1974
Daane spent several years with the Federal Reserve Bank of Richmond
and taught economics at the University of Richmond. He joined
the U.S. Treasury in 1960, serving in various capacities until
his appointment to the Board of Governors in 1963.
Career highlights:
When I left the Board, in my great unwisdom I took two virtually
full-time positions, the vice chairmanship of Commerce Union Bank,
Nashville, Tenn. (now part of NationsBank) and the Frank K. Houston
Chair of Banking at Vanderbilt University, the latter a post I
continue to hold on an emeritus basis. In my banking experience
I became chairman of the International Policy Committee of the
bank, which was deriving more than 20 percent of its earnings
from foreign lending, and this involved me in many experiences
overseas. My international responsibilities at the bank dovetailed
with my experience as more or less the international member of
the Board.
As to my university experience, teaching and working with young
people is a "constant highlight" and the most rewarding part of
my post Federal Reserve Board years. I have helped in the development
of an outstanding group of students and frequently assisted them
in their job searches as well. I have consistently urged them
to include public service at some point in their careers!
View on price stability emphasis:
I have generally been regarded as a "hawk" on inflation and rightly
so. My friend and successor at the board, Henry Wallich, used
to say that on the Martin Board, the chairman and I both merited
a 10 rating on an anti-inflation scale of 10-1. In my interview
with President Kennedy prior to his appointing me to the Board,
he began by saying, "Daane, I know where you stand on inflation,
but where do you stand on growth?" I began my answer by saying
inflation is the greatest enemy of sustainable growth, which I
still sincerely believe. Therefore I applaud the Board's stance
in recent years, beginning with Paul Volcker who led the System
in breaking the back of the then-high inflation. My current concern
is that the general acceptance of a 3 percent or 4 percent inflation
rate as a "good result" will put us on the wrong path in terms
of the objective of maximum growth with price stability.
Memorable experience:
Certainly one of the most memorable was the Dec. 4, 1965, action
of the Board to raise the discount rate despite administration
pressure opposing the move. It was the only occasion during my
Board tenure that I was pressed directly by top administration
officials--most notably Secretary of the Treasury Fowler, in his
courtly Virginian manner, at breakfast in Florida the day of the
Board meeting and by Undersecretary Deming in far-from-courtly
fashion in his office later that day. They did not convince me
because I was fearful of the inflationary potential of then-escalating
federal spending, and in the end I was the swing vote in favor.
The president immediately castigated Martin, but by February the
administration by and large admitted that we had made the right
move. Another "most memorable" was by belated participation in
the second devaluation of the dollar engineered by Paul Volcker.
At his request, I flew from Basle to join Volcker in Paris and
we then flew to Bonn on Feb. 12, 1973, for the announcement at
the U.S. ambassador's residence with two of our counterparts from
Japan. The Japanese negotiators headed by Hosomi cut discussion
off at midnight because they had been up for 24 hours. But Washington
insisted we reach agreement because they had already laid on a
press conference to announce it. So Volcker persisted by contacting
Japan directly and reaching agreement involving a yen appreciation
around 2 a.m. Bonn time, just in time to meet the press conference
deadline in Washington!
Advice for the chairman:
When I was on the Board, as a courtesy I normally sent a draft
of my speeches to Chairman Martin who would always send them back
with a single comment, "Keep up the good work." That would be
my advice to the present chairman, and I would respectfully suggest
that any future chairman would do well to emulate some of his
predecessors, most notably Bill Martin, Paul Volcker and Alan
Greenspan!!
Andrew F. Brimmer
1967-1974
Brimmer spent much of his early career in academia, teaching
at Michigan State University and the Wharton School at the University
of Pennsylvania. He joined the Commerce Department in 1963 and
was assistant secretary when appointed to the Federal Reserve
Board. Brimmer was the first African American to serve on the
Board of Governors.
Career highlights:
Upon leaving the Federal Reserve Board in August 1974, I taught
courses on capital markets and finance at the Harvard Business
School for two years. I established my economic and financial
consulting firm (Brimmer & Co. Inc.) in July 1976, and I continue
to operate it. I also serve on several corporate boards--including
Bank of America and DuPont. From June 1978 through November 1994,
I was a public governor of the Commodity Exchange, Inc. In that
role, I chaired the Special Silver Committee which resolved the
"Hunt Silver Crises" in 1979-80. In 1991-93, I served as co-chairman
of the National Commission on Financial Institution Reform, Recovery
& Enforcement. Our report, entitled "Origins and Cases of
the S&L Debacle: A Blueprint for Reform," was published in
July 1993. On June 1, 1995, President Clinton appointed me chairman
of the District of Columbia Financial Responsibility and Management
Assistance Authority. This "financial control board" was appointed
to oversee Washington, D.C.'s fiscal affairs and to help restore
the city to financial health.
View on price stability emphasis:
I believe the Federal Reserve's responsibility is to promote both
price stability and economic growth. However, when these two objectives
conflict, I believe the achievement of price stability should
be given priority. In that context, the restrictive monetary policy
adopted by the Federal Reserve in February 1994 was appropriate.
Memorable experience:
My most memorable experiences were provided by the efforts of
the Federal Reserve to protect the money and capital markets during
the failure of the Penn Central Railroad in 1970 and of Franklin
National Bank in 1974. When Penn Central failed, it defaulted
on its outstanding commercial paper, and that event could have
threatened the viability of the commercial paper market generally.
To forestall that possibility, we told Federal Reserve banks to
act as "lenders of last resort" to nonbank firms that had issued
commercial paper, and the funds were channeled through commercial
banks. In a similar way, the failure of Franklin National Bank
exposed both the domestic CD market and Eurodollar market to disruption.
To prevent this from happening, Franklin was allowed to borrow
from the Federal Reserve Bank of New York to replace the outflow
of deposits from its branches in New York and London. We permitted
such borrowing, although we knew in advance that Franklin would
fail. Our goal was to protect the domestic money market and the
Eurodollar market as financial institutions.
Advice for the chairman:
I would advise the chairman to keep uppermost in his mind the
fact that the Federal Reserve is an independent agency within
the federal government, but also independent of the executive
branch. He should do everything he can to safeguard that independence.
The record shows that (with only a few exceptions) presidents
or their aides--from President Wilson through President Bush--have
tried to capture or greatly influence monetary policy. He should
remain alert to defend against such intrusions.
Philip C. Jackson Jr.
1975-1978
Jackson came to the Board of Governors with an extensive background
in housing and mortgage banking. He had been mortgage vice president
and director with a family-owned mortgage banking company in Alabama
as well as a past president of the Alabama Mortgage Bankers Association
and the Mortgage Bankers Association of America.
Career highlights:
Director of 10 public corporations. Vice chairman of Compass Bancshares
Inc., a regional bank. A member of the Thrift Depositors Protection
Oversight Board to clean up the savings and loan mess. Now a professor
at Birmingham Southern College teaching finance courses.
View on price stability emphasis:
Since the public and those leaders in the Congress and White House
whom the public elect think that 2.5 percent to 5 percent inflation
is now acceptable, the Fed has the primary role in price stability
for our country. This is unpopular and misunderstood--but necessary.
Memorable experience:
Getting sworn in by Chairman Arthur Burns while President Gerald
Ford and the Cabinet stood nearby in the Board Room. This was
the first visit by a president to the Board since Roosevelt dedicated
the building.
Advice for the chairman:
Continue the tradition of independent courage and fortitude to
do the right thing. There is a wide, strong body of support for
the Federal Reserve's role within government in all parts of our
country and the world.
G. William Miller
1978-1979
Miller began his professional career with a Wall Street law
firm. He later joined Textron in Providence, R.I., rising to the
position of chief executive officer. He was chairman of the Board
of Governors.
Career highlights:
My resignation as chairman of the Board of Governors in August
1979 was in order to accept my appointment by President Carter
as secretary of the Treasury, a position I held from August 1979
until January 1981. Following my term at Treasury, I organized
G. William Miller & Co. Inc. as a small private merchant banking
company to help develop business enterprises. The company has
had a wide range of activities, including restructuring of companies,
managing private investments, serving as financial adviser and
managing investments in such areas as real estate and agricultural
projects.
During the period from January 1990 until February 1992, I also
served as chairman and chief executive officer of Federated Stores
Inc. to guide the company through the Chapter 11 process. The
company's activities included major department stores, a regional
supermarket business and substantial real estate holdings. The
reorganization was successfully completed and my assignment ended
in February 1992.
View on price stability emphasis:
I support the Fed's emphasis on price stability. Experience tells
us that once the specter of inflationary expectations is unleashed,
it is very difficult to get the genie back into the bottle. In
the United States, inflation is a very destructive process that
slowly saps the vitality of our economy. Over time, real economic
growth and job creation are fostered best in an economy with both
a low rate of inflation and low inflationary expectations.
Memorable experience:
During my short tenure, the Fed was faced with challenges of stabilizing
the dollar and coping with the huge inflationary forces unleashed
by the 1979 oil price shock triggered by the upheaval in Iran.
One of the consequences was a substantial outflow of funds from
the banking system into market instruments. During this period
the Fed took a lead in urging decontrol of natural gas prices
and later decontrol of domestic oil prices, in order to allow
the market system to operate in adjusting to the inflationary
impact. The Federal Reserve also took the lead in revising banking
laws to provide for more universal and uniform reserve requirements,
eliminate Regulation Q, permit interest payments on checking accounts,
deal with international banking issues, and so on.
Advice for the chairman:
The Federal Reserve chairman should continue to focus the Fed's
efforts on maintaining price stability. The prospects for economic
growth and job creation will be enhanced by the Fed pursuing a
consistent policy of keeping inflation at a very low level. Another
area where the chairman must be concerned relates to the accelerating
trend of consolidation within the banking industry. This will
require the Fed to be alert to the prospect of potential dislocations
from excessive concentrations, anti-competitive combinations and
service changes. The Fed's task will be all the more challenging
because of the need for reduction of federal deficits, the enormous
expansion of global currency and other transactions, and the technological
revolution in communications and data processing.
Lyle E. Gramley
1980-1985
Gramley began his career at the Kansas City Federal Reserve.
He left the Fed to join the faculty at the University of Maryland,
later returning to a staff position at the Board of Governors.
He was a member of President Carter's Council of Economic Advisers
from 1977 to 1980.
Career highlights:
Since I left the Board in 1985, I have been employed as an economist
by a trade association and have had my own consulting business.
My career has been interesting, fun and financially profitable,
but devoid of notable highlights. I have enjoyed observing the
monetary policy process from the outside and keeping in contact
with many friends at the Fed.
View on price stability emphasis:
I wholly approve. The performance of the economy since the early
1980s has been remarkably good; restoration of price stability
has been an important contributing factor. What is quite remarkable
is that monetary policy has been conducted so effectively despite
tremendous obstacles—such as the loss of the monetary aggregates
as a policy guide, the explosion of the budget deficit in the
first half of the 1980s, the credit crunch of a few years ago
and the recurring instabilities of international financial markets.
Memorable experience:
It will always be gratifying to have been a member of the Federal
Open Market Committee during a period when inflation was reduced
from double-digit figures to 4 percent. I also value greatly the
kind remarks that have been made to me by a number of Reserve
bank presidents regarding my role as chairman of the Reserve Bank
Activities Committee.
Advice for the chairman:
If it is Greenspan, he doesn't need my advice—he has done
a superb job. Obviously, the Fed needs to keep its focus on maintaining
price stability. The greater openness of the Fed, particularly
as regards immediate disclosure of policy actions, should be continued.
I'm not sure that lots of public chatter by Federal Reserve officials
is all that helpful, though it certainly confuses financial markets.
H. Robert Heller
1986-1989
Heller spent his early career in academia and at the International
Monetary Fund. He was senior vice president and director of international
research for the Bank of America at the time of his Board appointment.
Career highlights:
I joined VISA International in 1989 as executive vice president
with responsibility for finance, risk management, security and
audit. In 1991, I became president and CEO of VISA U.S.A. I left
VISA in 1993 and formed my own consulting company, Heller International,
as well as the International Payments Institute. The International
Payments Institute has been working exclusively for VISA, while
Heller International has had engagements with some of the largest
banks and central banks in the world.
In all these endeavors, my service on the Board has been most
valuable in giving me not only the central banker's perspective
on the entire economic and financial system, but in providing
unique insights into the functioning of the banking sector and
the payments system.
View on price stability emphasis:
I believe that much of the increased policy focus on price stability
came about during my time on the Board, which spanned both the
Volcker and Greenspan years. There was a general consensus that
the traumatic experience with double-digit inflation in the late
'70s and early '80s was the key cause of the deep recession of
the early '80s and should never be repeated. If I was able to
contribute in a small way to the increased policy focus on price
stability as a precondition for sustained growth, my years on
the Board were well spent.
Memorable experience:
Undoubtedly the most memorable experience was the stock market
crash of October 1987. Everybody's attention was tightly focused
on containing the damage and preventing a spread of the financial
disruptions throughout the financial system. Do not forget that
at that time we were also dealing with a severe S&L crisis
and almost 200 bank failures per year. Without swift supportive
action on behalf of the Fed, the stock market crash could well
have been the straw that broke the back of an already weak camel.
Probably my most enduring achievement was much more mundane.
During my service as administrative governor I designed—with
the help of my children—a flag for the Federal Reserve which
will probably outlive all of us. That certainly was something
that will be remembered.
Advice for the chairman:
Speak more clearly. The Fed used to be afraid of announcing its
own policy action—only to find out that clear policy statements
after FOMC meetings actually eliminated guessing and confusion
in the markets. The same probably holds true for the words of
the chairman between FOMC meetings.
Manuel H. Jounson Jr.
1986-1990
Johnson was assistant secretary of the U.S. Department of the
Treasury prior to his nomination to the Board. Six months after
he became governor, Johnson was named vice chairman of the board.
Career highlights:
Developing a private company with a partner and learning to manage
business risk in the marketplace. Also, service on the boards
of directors of several interesting companies and organizations
such as Intercapital Mutual Funds Group managed by Dean Witter;
Greenwich Capital Markets Inc.; NVR Inc.; and NASDQ stock market.
View on price stability emphasis:
I applaud the Fed's strong emphasis on price stability and would
like to think I played a part in promoting this objective. However,
I have always been wary of very simplistic rules regarding the
goals of price stability. There are obvious problems with measuring
inflation accurately and in a timely fashion. Chairman Greenspan
addressed some of these measurement problems in recent testimony.
The Fed must base policy decisions on leading indicators of inflation
in order to manage inflation expectations and maximize its credibility
as a source of stability for the economy.
Memorable experience:
While I had many memorable experiences during my tenure at the
Fed, there are two that were most memorable to me. First was the
debate over monetary policy that led to a controversial 4 to 3
decision by the Board of Governors to cut the discount rate in
February 1986. Second was the stock market crash in October 1987.
This was the greatest one-day stock market collapse in U.S. history.
The public had always associated the 1929 stock market crash with
the beginning of the Great Depression of the 1930s. However, this
time the Fed managed to instill confidence with its timely actions
to maintain liquidity in the financial system without compromising
its disinflation objectives.
Advice for the chairman:
I am reluctant to give advice to Chairman Greenspan or any future
chairman. The only point I will make is that technological change
has now made it possible for markets to obtain information instantaneously
and move financial capital almost anywhere in the world very rapidly.
Policymakers must be alert to this fact and always think ahead
in preparation to act in a timely fashion.
Wayne D. Angell
1986-1994
Angell was a professor of economics at Ottawa University, Ottawa,
Kan., for nearly 30 years. At the same time, he was actively involved
in the operation of a large farm. He was a member of the Kansas
House of Representatives in the 1960s and served as a director
of the Kansas City Fed prior to his appointment to the Board of
Governors.
Career highlights:
The opportunity to participate with people in the private financial
sector to assess monetary and fiscal policy. I was surprised that
informed opinions about the Fed were so uniform among world capital
players. For someone who had grown up in Plains, Kan., becoming
an economist on Wall Street offered a significant contrast to
previous experiences. I found that I could get as excited about
my new opportunity on Wall Street as I had been enthused about
farming, teaching, consulting and being a member of the state
Legislature and the Board of Governors of the Federal Reserve
System. What is not different is that I am still learning and
teaching.
View on price stability emphasis:
The benefit from our progress toward price stability has been
even larger than I expected. I am not sure that any of us realized
that the progress made toward price stability in the Volcker/Greenspan
era would have produced such competitive gains for U.S. firms.
We have seen a focus shift among U.S. corporate managers to minimize
the number of labor hours going into a unit of output and thereby
an enhancement of U.S. labor productivity. This managerial revolution
has at least temporarily broken the link in the price-wage spiral.
As a result, monetary accommodation no longer permanently locks
us in a path of higher inflation. Inflation now may be more easily
reversible.
It is disappointing that the foreign exchange value of the dollar
has not paralleled the progress that has been made on price level
stability. My guess is that foreign exchange markets are now more
than ever focused on the persistent U.S. balance of trade deficit.
I am confident that a renewed commitment to price level stability
by the Fed along with a new focus on fiscal discipline will alter
our long-term reliance on outside capital flows.
Memorable experience:
There really were two equally memorable experiences. First was
a monetary policy action to derail the commodity price deflation
in 1986 and thereby to avoid a worldwide recession which would
have been abetted by significant bank failures. Unfortunately,
our success in avoiding deflation set the stage for a more protracted
battle to get inflation back down so low that it would not make
a difference. I was very pleased that we were able to get the
year-over-year Consumer Price Index inflation rate and the core
inflation rate down to more satisfactory levels at the end of
my term.
Advice for the chairman:
Of course, Alan Greenspan does not need any advice from me. He
understands so well the importance of price level stability and
stability in the exchange value of the dollar. So I would say
to him or to any successor to keep the faith.
For me, I have little confidence that central bankers can add
one whit to economic growth by accurate enough economic forecasts
to stabilize our economic growth path. I am sure that real progress
can be made, both for growth and price stability, by asking the
one and only question: Does the current stance of monetary policy
risk too fast a pace of disinflation or does it succeed in achieving
a discernible and gradual disinflation? If the Fed is consistently
working to gradually reduce inflation, then market forces will
achieve a higher economic growth path and higher employment than
can possibly be achieved by attempting to fine-tune economic activity.
John P. LaWare
1988-1995
LaWare brought 35 years of banking experience with him to the
Board. After 25 years at Chemical Bank, he became chief executive
officer at Shawmut Corp. in Boston and also served as a director
of the Boston Fed.
Career highlights: Not too many since it has been only
two months since I retired. I am doing some pro-bono work for
Massachusetts and I have had two invitations to consider director
appointments. I am also considering some part-time consulting
work. Alas, in spite of hard work, not much improvement in my
golf handicap.
View on price stability emphasis:
Keep it up!!!
Memorable experience:
The battle to preserve an important role for the Fed in banking
supervision and maintain the dual banking system.
Advice for the chairman:
The policies of the Greenspan era have been successful—they should form a model upon which to base future policy.
The September 1995 issue of The Region includes comments from the governors listed below:
Sherman J. Maisel
Jeffrey M. Bucher
Robert C. Holland
David M. Lilly
Nancy H. Teeters
J. Charles Partee
Frederick H. Schultz
Annual Report
