Regional Update (January-March 1996)
Regional Update (January-March 1996)
|Index||The state of the states||Southeastern manufacturing survey||Southeastern economic indicators|
Cover Story - New President to Guide Atlanta Fed Through Era of Change
|New President to Guide Atlanta Fed
Through Era of Change
trong leadership. Intellect. Breadth of vision. Character. These are among the qualities Bank officials point to in explaining why Jack Guynn was chosen as president of the Federal Reserve Bank of Atlanta.
When he came to the Atlanta Fed in 1964, Guynn had no idea he would stay so long or rise so high. He attributes his success to his willingness to take off his jacket, roll up his sleeves, and dive into a task. He's committed to teamwork, and he's willing to take chances.
His training as an engineer still influences the logical, methodical way he approaches problem solving, but Guynn says he stopped thinking of himself as an engineer after about two or three years at the Atlanta Fed. He became a manager of people and a large organization that has three equally complex missions: studying and monitoring the economy to assist in making monetary policy decisions, processing a multitude of cash, checks and electronic payments, and supervising financial institutions.
Guynn believes that adapting to change will be a constant theme—and a major challenge—for the Bank in the years ahead.
Jack Guynn, who assumed his new role on Jan. 1, sat down with Regional Update to discuss his views and thoughts about many of the issues he faces as president.
Q: What do you see as the most pressing issues for you today as president of the Atlanta Fed?
A: Really, I think of two broad categories of issues that are going to take a lot of my time. The first is one that faces almost any business, and that's adapting to change. Of course it has its own peculiar meaning for us at the Federal Reserve. As I think about the Bank and the things we do, it seems to me that in all three of our areas of basic responsibility we've just got massive change going on, and in that sense, we're no different from so many businesses today.
In the monetary policy side of the house, the economy has become very integrated with the rest of the world—more so than ever before. I can remember going to FOMC (Federal Open Market Committee) briefings some years ago, and we maybe spent five minutes talking about international issues. Now you can easily consume half of the discussion (with international issues). With the flow of goods and capital now freely crossing borders, the whole structure of the U.S. economy and its place in the world have changed the way we think about monetary policy. And we're constantly trying to refine our understanding of what's going on in the economy and how to best make and gauge monetary policy.
In the payments side of the house, again, it's technology that's driving the change. The payments business today is so different from 10 years ago, and five years from now we probably won't recognize it. I think that part of our job is to be an agent for change. We have to do what we can to help the United States take advantage of technology to have lower costs, lower risk, and new ways of making payments. And then on the other side we must be careful that the new things put in place don't create inordinate risk. Change is just a major element for this organization. It may seem kind of crazy that an institution like the Federal Reserve, as staid and stable as we think of ourselves as being, is undergoing such dramatic change. The changes are coming so much faster, almost exponentially faster, than ever before. We just have to run faster and keep up with what's going on around us.
The other major, major group of things I think about are what we need to do as an institution to maintain our reputation, our integrity, the confidence that people need to have in us as an institution. It's what we're all about. It's why we were created in the first place. It's the basis on which the Congress will allow us to continue to be the kind of organization we are, independent within government. So that means that in everything we do, we have to keep asking ourselves, "Are we doing the right thing? Are we above reproach in terms of being evenhanded and deciding what's right, whether it's monetary policy or whether it's bank supervision?" We need to make sure our people approach everything they do with the highest integrity. I just can't remind myself, and our staff, often enough how important that is to us as an organization. It plays out in lots of arenas. It's just really important—something I don't think we can ever forget about if we want to continue to be a truly independent and important central bank.
Q: How would you characterize your monetary philosophy?
A: I guess I'm going to leave that to others after they've watched me and listened to what I say and see how I vote when the time comes to vote on the FOMC. I don't like the usual labels of hawk and dove. I'm not going to put myself in either of those camps. I was trained as an engineer, and that taught me to look at all the alternatives, think things out as much as they can be thought out, and then try to come to the best conclusion after having considered all the facts. I guess in the nomenclature of the day that makes me an eclectic. I would accept that kind of a label.
I would say that I come with a—maybe this is because of my upbringing, my background—I come with a really strong commitment to the control of inflation. In fact I don't think I'd be a good central banker if I didn't have that on the top of my list of things to continue to think about. The single biggest contribution that we as an organization can make and that I, as a member of the FOMC, can make is to help create a climate, an economic climate, where inflation is low, and people can count on it to be under control, and they can make their business and personal decisions with some certainty about what is going to happen to prices.
Q: Can the U.S. economy experience significant growth if the Fed continues to hold the line on inflation?
A: Oh, I think absolutely, absolutely so. In fact there's a growing body of research and evidence that suggests that economies with low inflation over time will exhibit the greatest growth. Sustainable economic growth is certainly consistent with holding the line on inflation.
Q: Is there an optimum unemployment rate, and how does the Fed influence unemployment?
A: Certainly labor markets and the unemployment rate are things we think about and talk about. We concentrate on trying to create an environment of sustainable growth, and with that will come job growth and, we hope, a low level of unemployment. So the two aren't inconsistent in my mind. In an ideal world everyone who wants a job should be able to get a job. But unfortunately there are always discontinuities and imbalances in the work force, and either people don't have the right skills or the jobs are in one sector of the economy or in one geographic region and the labor pool is somewhere else. But recently, unemployment has been low and we have had good economic growth, and I think that's the best of both worlds.
Q: Why is the federal budget deficit an important factor in our national economic health?
A: It's a simple matter. If we spend less paying off government debt, we can redeploy our capital resources into building facilities that create economic growth, buying technology that improves productivity, and training our work force so it can be more productive. If we shift the use of those resources from paying debt to those kinds of more productive uses, we clearly get better economic growth, and in that sense it's a terribly important issue.
Q: Is there anything the Fed can or should do to ease the deficit problem?
A: The tough decisions that need to be made with regard to the deficit are in the hands of our elected officials. Those are the people we have chosen to make the difficult decisions about how to spend our public monies and to make some of the really tough social choices that are going to have to be made. So those decisions are not the Fed's to make. I think, however, that those of us in public policy positions at the Fed need to continue to speak out about the importance of tackling this problem and about the huge payoff it has for economic growth for the country. I think we've done that, and I think we need to continue to do that, and I think we can make a contribution by just raising the level of debate.
I don't think we should be surprised, and maybe not too disappointed, that it's taking so long and that the debate has been as protracted as it has been because these are very difficult, very fundamental changes in the way that government operates. They're not easy decisions; they're clearly not easy decisions. So I don't think we should be too impatient. We need to just keep talking about how important it is to get those decisions made.
Q: What is your outlook for the southeastern economy for 1996?
A: I feel pretty good about the outlook for the Southeast. I think we're going to see continued moderate growth in 1996. There seems to have been some deceleration from the growth that we saw last year, so in that sense we may feel a little less optimistic. But I think that the southeastern economy is still strong and well balanced, and I see little evidence at this point of tight labor market conditions. So I think we'll have continued moderate growth with the continued low inflation levels that we've seen. If you look across the region, obviously it varies by industry and by state. Florida and Georgia are hot spots. A lot of people attribute the rosy outlook in Georgia to the impact of the Olympics, and that's certainly a factor, but I think that even without the Olympics, the fundamentals for this region are still very strong, with lots of companies moving operations here. We'll have some temporary slack created after the Olympics, and some workers will have to be absorbed back into the economy in Georgia and in the neighboring states. But I think, based on what we see now, there's no reason why we shouldn't continue to chug along at a pretty moderate pace.
Q: The Southeast has outpaced the nation in economic development for some time. How long can this continue?
Q: If all these companies are moving here, are we benefiting at the expense of the economies in other sections of the country?
A: Well, there's always that zero-sum-game argument that can be made. But I think that if a company moves its operations to this region of the country and can turn out a product or can turn out a service in a more competitive way—through more productive plants and equipment, or better use of technology, or greater productivity from the work force—then over the long term that's a net gain. An example is the automotive industry, which seems to be gradually shifting a good part of its operations from the old traditional automotive belt into Tennessee and the surrounding areas. With new plants and new equipment and new labor/management relationships, the companies can build a product that's different from the product they were building in their old place. So I think there is a net gain.
Q: Are there any long-term economic issues that are not getting enough attention in the midst of the region's rapid growth?
A: One of my favorite subjects, and something I'm going to speak out a great deal about in my new role, is education. This may be a particularly vital issue as we go about making adjustments in federal spending, and we have to find new ways to finance things that we decide are important to us. In my own mind, education is an area where we probably can't spend too much, and we get reminded over and over again—whether it's in the welfare debate or the scarcity of people for key jobs—that the payback from investment in education is just huge. It's getting some attention, but I think it can never get too much attention, and it's something I hope we can influence people to think even harder about.
Q: Where do you think the banking industry is headed, and what are the forces that are going to change that industry?
We also see a reengineering in banking just like we see in lots of other industries. Banks are using technology in new ways to deliver new services, streamline their back-office operations, and manage risk. So technology is a major change agent for the banks. Again I think you see just fundamental change going on in the banking business, and the landscape's changing very fast.
In the bank supervision area there's a fundamental change that we're trying to help take place. Historically, we've had a certain way of viewing ourselves as bank supervisors. I think this is also true of the other bank supervision people, the FDIC (Federal Deposit Insurance Corporation) and the Comptroller of the Currency. We've viewed ourselves almost as auditors, going in and checking up on banks and looking over their shoulders and checking their loans and checking their books. We're trying to evolve into a new way of thinking about bank supervision. Instead of us telling a bank what to do and how to do it, we're now looking for the banks to address those issues themselves and to have put controls in place to limit the risks that they take and the exposure they have. We can then go in and look for the bank to have set up those kinds of checks and balances and controls. And if they have, then that means we don't need to come back and do the same kind of scrutiny we did in the past.
Q: It seems pretty clear that you're in favor of interstate and intrastate branching.
A: The only thing that I would add is that at the same time that we have created these very large banking entities, the bank that chooses to remain a small, independent, community bank servicing just a small local community can compete effectively and profitably head-to-head with the big guys. With the new technology that's available, and with the ability to buy franchised services from large providers, there are all kinds of examples of community banks that are very successful. They're serving a very different niche, and I don't see that changing either. So for those who think we're going to end up with just a handful of very large banks one of these days, I doubt that's what it will look like.
Q: How can the Atlanta Fed help effect the social changes needed to solve local and regional problems?
A: An important part of what we do is to speak out on economic issues and, through our outreach programs, share what we know, what we see. We should continue to share the debate on economic issues with people ranging from high school students and teachers to college students and university professors, to business people and professionals in the field of economics. We sit on a wealth of economic information and understanding of the economy and what makes it work. One of the tricks for us is to find ways to share those things that we know and leverage that with the broader community. I think that's an important part of what we should be doing. For me, and others on a senior level, to speak out on the economic issues of the day, such as education, is an opportunity for us to contribute to the public debate. And then, as with any other large employer, we must encourage our employees—both on bank time and on their personal time—to be active in their communities whether it's their own church or some business endeavor to help the community. It's something that we, as an organization, feel very strongly about and should encourage so that we'll be able to make a contribution through the work and energy of our employees.
Photos by Michael Schwarz.