Unconventional: A Policymaker's Reflections on Crisis to Recovery
"I think it is incumbent on the Main Street component of the Fed … to represent Main Street America the way it was intended in the original Federal Reserve Act. I felt that the [financial] crisis actually brought out the role of the regional Federal Reserve banks pretty extensively."
—James Bullard, President and CEO
In looking back at the past 10 years, James Bullard recounted how the financial crisis demonstrated the importance of the Fed's decentralized structure that includes three distinct but complementary components: the Board of Governors in Washington, D.C.; a Federal Reserve bank in New York City, long regarded as the nation's financial capital; and 11 other regional Reserve banks to represent the voice of Main Street across the rest of the nation.1
As the president and CEO of the Federal Reserve Bank of St. Louis, Bullard oversees the Eighth Federal Reserve District.
"I think it is incumbent on the Main Street component of the Fed to push back against its Washington and Wall Street counterparts, to represent Main Street America the way it was intended in the original Federal Reserve Act," Bullard said. "I felt that the crisis actually brought out the role of the regional Federal Reserve banks pretty extensively."
In addition to providing crucial economic input from their respective districts as part of FOMC monetary policymaking, the Fed's regional Reserve bank presidents also serve as the CEOs for their respective institutions. Reporting to a board of directors, they are responsible for establishing the direction of their banks, achieving short- and long-term objectives, and running efficient operations.
Upon becoming president and CEO of the St. Louis Fed on April 1, 2008, Bullard went from having eight employees reporting to him as deputy director of research for monetary analysis to overseeing an institution of more than 800 employees, with headquarters in St. Louis and branch locations in Little Rock, Ark.; Louisville, Ky.; and Memphis, Tenn.
He acknowledged the importance and benefit of having a very experienced senior management team already on deck, particularly as he took over the reins amid the country’s escalating financial crisis and a time of dramatic regulatory and technological changes. "The executive team was very strong," Bullard said. "We were in pretty good shape from a management perspective, even though I was new."
Bullard and his senior team didn't want the St. Louis Fed to be simply a good institution. To improve the Bank's performance over time, they believed it should be run like a top-performing business, with a passion for excellence, innovation and service to the Federal Reserve's Eighth District.
"The basic idea was for the Bank to better understand the needs of the Federal Reserve System, as well as the environment in which the nation's central bank is operating, and then to develop our own talent or find the areas where we can contribute," Bullard said. "We have found places where we can and are able to contribute, and that has led to significant expansion here at the St. Louis Fed."
Examples of the growth, innovation and opportunities resulting from those efforts include:
Diversity and inclusion was another early area of emphasis: One of Bullard's first actions upon becoming CEO in 2008 was to launch the St. Louis Fed's diversity and inclusion program office.
"I felt it was important to be able to recruit the workforce of the future, which I think is going to be a lot more diverse, and is already a lot more diverse, than what we’ve seen historically around the Bank," Bullard said. "In order to do that, we had to move up the learning curve as an organization and get better at our cultural competencies."
Bullard said the Bank’s most challenging areas of diversity recruitment remain the IT fields and economics. "We'd like to get better on all kinds of dimensions on this going forward," he added.
One of his top moments as CEO came in 2016 when the St. Louis Fed was designated as St. Louis' top workplace among large companies. The awards were sponsored by the St. Louis Post-Dispatch and were based on employee surveys.
"I felt very gratified by that, and I felt like it said a lot about our employees and our workplace," Bullard said.
The Fed supervises and regulates all bank holding companies, savings and loan holding companies, state-chartered banks that are members of the Federal Reserve System, and any nonbank that is designated as a systemically important financial institution by the Financial Stability Oversight Council.
Supervising banks helps the Fed better perform its critical functions as a central bank; likewise, the Fed's expertise in monetary policymaking contributes to its being a more effective supervisor.
The ability to have "boots on the ground" for supervising banks at all levels provides the Fed with the opportunity to glean deeper insights into the health of the financial system and local economies.
"During the Dodd-Frank Act debate in 2010, there was discussion about changing the way the U.S. regulatory structure worked," James Bullard said. "Many proposals were on the table, but my feeling was that you needed to keep the Fed involved in regulation, because otherwise, monetary policymakers would lose touch with the nature of financial institutions and how important they can be to the macroeconomy."
As an example, Bullard cited what happened in the United Kingdom during the financial crisis. In the late summer of 2007, amid the freeze in global money market liquidity, there was a run on Britain's fastest-growing mortgage lender, Northern Rock.
At that time, the U.K. financial services industry was overseen by the Financial Services Authority (FSA), which had been established in 2000 after banking oversight was separated from the Bank of England.1
"When there was a run on Northern Rock, the Bank of England was at a disadvantage because the regulatory structure had been separated from the monetary structure," Bullard said. "This experiment alone shows that you really want the central bank to be intimately involved in bank regulation, because there's a great deal of feedback between that process and the monetary policy process."
By 2013, regulatory oversight was returned to the Bank of England, and the FSA officially shuttered.2
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