Our Economy

Dallas Fed chair Richard Fisher on our lame economy.

Dallas Fed Chair Richard FisherName: Richard Fisher Age:59 Home: Dallas
Qualifications:President and CEO of the Federal Reserve Bank
of Dallas / 2008 voting member of the Federal Open Market Committee / Assistant to the Secretary of the Treasury during the Carter administration / Former hedge fund manager

• The Federal Open Market Committee sets the base interest rate off of which everything else is keyed. Let me give you an analogy. Think of a sprinkler system. What you’re trying to do with the sprinkler system is keep this massive lawn—the U.S. economy—green and healthy. That’s an almost $14 trillion lawn. If we put too much capital out there, it will overwater the lawn and kill it with inflation. If we are too parsimonious, then the lawn turns brown because we’ve starved it of liquidity. So the valve—the faucet that turns the sprinkler on and off—is the interest rate that we adjust. Seventeen of us are part of that discussion. Sometimes we have unanimity; sometimes we don’t. But whatever the majority decides is what the flow will be coming out of the faucet.

• Some people would say that the Federal Reserve kept rates too low for too long and basically let too much water get out on that lawn.

• William McChesney Martin Jr., a former chairman of the Federal Reserve, used to say that the job of the Fed is to take the punch bowl away just as the party gets going. Unfortunately, the Fed didn’t do that, and now we find ourselves in the situation we are in.

• When I was asked recently “What position should I take in the financial markets?” I said, “The answer is somewhere between cash and fetal.”

• Everyone is afraid to lend money right now, even to people they know. That’s the nature of a credit crash. Capital is the basis of capitalism,and credit is the lifeblood of capital, so we’re doing everything we can to get the credit system operating again more freely.

• There’s enormous uncertainty around the world, and uncertainty is the greatest enemy of capitalism.

• My most painful memory of childhood was watching my mother hawk her engagement ring. I remember us sitting down with a rather crude individual, who paid her nothing for what the ring was worth. But we needed to put food on the table. My father was a used-car salesman, and he had lost his job. I’ll never forget that. I understand the pain that people experience when we are in an economic downturn.

• There’s no such thing as a little bit of excess. The irrational exuberance of the past few years was, as I’ve said before, a sustained orgy of excess and recklessness.

• I have a bull named Irrational Exuberance. He’s a 2,500-pound Simmental, and he’s a very happy bull. We named him after Alan Greenspan’s favorite term. When Greenspan came here for his going-away party, we had a huge picture of Irrational, and we gave him petting rights for life. Greenspan later sent me a photo of us standing under that huge picture. It said, “Richard, irrational exuberance is truly a lot of bull.”

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