Advisory Council Provides Insight into Economic Life of the Ninth District

Gary Stern claims the distinction as the only president of the Minneapolis Fed since the formation of the Advisory Council on Small Business, Agriculture and Labor in early 1985.

And, as far as he's concerned, the council has proved to be a valuable learning experience for him since he became president that same year.

There is "no question" in Stern's mind as to the value of the council: "It's an effective, low-cost way to get information, to learn first-hand about some of the issues of importance to the Ninth District, from people who are plugged into those issues."

That learning experience is reciprocated, according to members of the council, who say they look forward to meeting with Stern and the bank's economists, both to tell the Fed staff about conditions affecting their business and community, and to hear the analyses of the Fed economists.

"It's one of the best blocks of time I've ever given," F. Mike Tuohy, president of Tuohy Furniture Corp. in Chatfield, Minn., says of his participation on the council.

Historically, advisory councils have been an important part of the Federal Reserve System's makeup: The Federal Advisory Council, which includes 12 members selected by the district banks, was formed in 1913 to advise the Federal Reserve Board and, in 1980 the Thrift Institutions Advisory Council, also with 12 members, was established to represent the views of the nation's savings and loans, savings banks and credit unions.

An Advisory Council on Small Business and Agriculture was formed for each of the 12 district banks in 1985 following recognition of the need for representation for those sectors—on a formal basis—within the Federal Reserve System.

While small business and agriculture were required to be represented on the Advisory Councils, other constituencies could be added according to each district's discretion. Some Federal Reserve Districts, including Minneapolis, immediately added a third element to the council—labor. Also, the Minneapolis Fed includes a representative from the financial services industry—typically one from a small, independent bank.

Since its first meeting in 1985, the 12 members of the Minneapolis Fed's Advisory Council have met three times a year, once in joint session with the bank's board of directors. The council members are appointed by the bank president for staggered, three-year terms and are selected to serve geographic, economic sector and gender/racial representation. Representatives from each district's Advisory Council also meet annually with the Board of Governors.

The Ninth District council members are from such diverse Ninth District locations as Wall, S.D.; Deer River, Minn.; Iron Mountain, Mich.; Glen, Mont.; and Sawyer, N.D. And, according to James Hammill, assistant vice president and secretary, the membership has evolved in its first four years. Initially, the bank was most concerned with appointing members who represented the economic and geographic sectors.

But now, Hammill says, there is equal emphasis on selecting members who are active in their community and who are good observers of business and economic trends. The ability to engage in a productive discussion, rather than simply advocating a certain position, is considered to be an important qualification for appointment to the council.

Prior to each meeting, council members receive a list of questions that are designed to inspire discussion. The meetings are closed to the public and no formal transcripts are kept in order to guard against public posturing, but the following topics give some idea as to the type of questions asked of the members: prices, labor markets, wage rates, capital investment, economic outlook, finance, agriculture and other topical matters such as the current problems in the savings and loan industry.

Specifically, under the topic of economic outlook, these questions, among others, were asked at a recent meeting: "What do you project for the year ahead in your business or economic sector? With respect to your own business outlook, is this a good time to expand, to invest and broaden sales, or do you feel a need to build reserves and be more cautious?"

Stern says the bank has modified the questions over time, making them broader in scope and encouraging discussion on broader issues—like monetary policy, for example—rather than just reporting on the local scene. Such discussion is more valuable, Stern says, because it can ultimately have some impact on policy decisions.

For his part, Stern says he serves mainly as an observer and commentator at the meetings. The council meetings are not intended to be a forum for the Federal Reserve System, he said, but rather they are meant to be information- gathering sessions for the bank staff.

"Firsthand experience is always good," Stern says of the face-to-face feedback provided at the council meetings. And that applies to the council members as well, according to Stern. "The Fed remains a mystery to many people. The council meetings help people understand the Fed."

Most council members would probably agree. Mike Tuohy says the Fed and the council members both have a lot to learn by their participation. He says it is important for the Fed to keep in contact with members of the economy.

"We have a feel for the economy—we live and die by it," Tuohy says.

Robert Knorr, a farmer from Sawyer, ND, says the council meetings are valuable because they ensure that the Fed is getting input from various sectors of the economy. More importantly, perhaps, Knorr says the meetings help to make the Fed a more human institution: "It's illuminating, from a layman's standpoint."

The council's labor representative, Bernard Brommer, secretary-treasurer of the Minnesota AFL-CIO, began his three-year term earlier this year, and even though he hasn't attended many meetings yet, he expects the experience to be positive.

"I'm pleased to be participating," Brommer says, "because I think it's important that the voice of organized labor be allowed to participate. To the point that we (organized labor) learn more, it is beneficial to us."

Another new member is the council financial services representative, Juanita Fish, president and CEO of Custer County Bank in Custer, SD At her first meeting this year, Fish says she was surprised at the similarity of certain economic conditions across the district. Sometimes, she says, it's easy to focus on local conditions, without realizing that other communities and regions are experiencing the same phenomena.

"The problems, as well as the good things, happen all over," she says. "Personally, I've already learned a lot. The give-and-take at the meetings is very valuable."

The key ingredient to successful council meetings, however, is the participation of the council members, Stern says. And to that end, the outlook of Mike Tuohy perhaps best addresses that point:

"My term expires this year, but if they asked me to do two more I'd do it. I'm going to be sad to see it over."

Members of the Advisory Council on Small Business, Agriculture and Labor
Agriculture
Bruce C. Adams (chair) Minot, N.D.	Robert D. Knorr Sawyer, N.D.
Steven P. Lawrence Blue Earth, Minn.	E. Maynard Smith Jr. Glen, Mont.
Small Business
Bill Hustead (vice chair) President Wall Drug Wall, S.D.	Jo Close Small business owner Eau Claire, Wis.
John I. Rajala President Rajala Lumber Co. Deer River, Minn.	Roger Scherer President Scherer Bros. Lumber Co. Minneapolis, Minn.
F. Mike Tuohy President Tuohy Furniture Corp. Chatfield, Minn.	William C. Verrette President Champion Inc. Iron Mountain, Mich.
Labor
Bernard L. Brommer Secretary-Treasurer Minnesota AFL-CIO St. Paul, Minn.
Small Depository Institution
Juanita Fish President and CEO Custer County Bank Custer, S.D.