On the Hot Seat

The view from the Boston Fed

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July 13, 2008

On July 23, Eric Rosengren will complete his first year as president of the Federal Reserve Bank of Boston. Rosengren talked with Boston Globe reporter Kimberly Blanton recently about his priorities for the Boston Fed, his summer reading list, and his views about Boston.

In May,you visited neighborhoods blighted by foreclosures in Chelsea and Dorchester. What did you see?
It was not only me but also Randy Kroszner from the Board of Governors in Washington. I also visited Springfield on a different day. Visually, it was obvious that a variety of properties on a street were boarded up. If you were someone looking to buy into that neighborhood, you would pause. When there are multiple properties affected, it has broader implications than if it is just one house on a street. You have to be worried about crime, vandalism, about copper piping being removed. It becomes a community problem, a problem for renters and for owners.

How do you see your public role as head of Boston's Federal Reserve?
Federal Reserve employees are public servants. I want this organization to make a difference in a variety of ways in the communities of New England. Subprime is one area we're looking at. Housing is priority one because of its immediacy. Regionally, we are spending some time thinking about those cities in New England that have not prospered as much as Boston. An example of that would be Springfield. I've asked my staff to look at the issues that have impeded development in those cities. I'm hoping to provide some analytical work to shed some light on the topic of retaining people who get educated at some of our leading colleges and universities. That's a preview of coming attractions.

In addition to data, what do you observe personally that helps you understand the economy?
I have many people in for breakfasts and lunches. The purpose of those is to reach out to a variety of different stakeholders throughout New England. They could be political figures. One of the advantages of being at the Boston Fed is that there is, between private equity and hedge funds, a wealth of information that isn't traditionally a source of information, so tapping those audiences has been important. I might have a lunch with commercial real estate developers or a group of community activists looking at housing issues. We also do outreach throughout New England to hear perspectives that provide some color for the financial data.

What cars do you keep in your garage and how much does it cost to fill the tank?
I have a 1997 Ford Escort. It has no air conditioning and roll-down windows. It's relatively fuel efficient. I also have a 1997 Dodge Caravan, which is primarily driven by my daughter who's 18. We purchased a 2004 Toyota Highlander from my father-in-law, but we're driving it less. It doesn't get enough miles per gallon, and it costs $50 to fill up the tank so it's spending a lot more time in the garage.

Are speculators helping drive up oil prices, as some economists contend? We've had a situation where demand for oil has been going up over time because of emerging markets like China, India, and Southeast Asia. So demand and supply are very tight. As a result, small changes in supply or demand can have big impacts on price moves for oil and gas. We've been surprised by how high prices have gone up. But I think the bulk of the movement is tied to supply and demand factors.

You're from New Jersey, attended Colby College in Maine, and got your PhD from University of Wisconsin. What is your outsider's view of Boston?
It's a wonderful city. It's very youthful as a result of the academic institutions - as an economist, there's almost no better place to be. It also has a nice mix of finance, academia, and medical and manufacturing that I find really invigorating. There are very few cities that have so many physical amenities, such as being close to the Cape and ski slopes and mountains and lakes.

What are you doing for your summer vacation? My daughter, who is 18, is working as a waitress. My son, who is nearly 16, plays in tennis tournaments. Normally, we go to national parks every summer and spend a week or two hiking. This will be the first summer we have not taken a trip to one of those national parks. We're going to be doing a lot of two- and three-day trips. We're going to Maine, we'll probably do a trip to Newport, and we spend a week in the Catskills every year with my extended family.

What's on your summer reading list?
I'm a history buff. One of the books my kids gave me was "A History of the Vikings." My grandfather was Swedish and came over to Ellis Island so I'm looking forward to reading it. The book "Mayflower" was given to me so I'm looking forward to hearing the real story of how our ancestors came over. My third book is "Collapse: How Societies Choose to Fail or Succeed" by Jared Diamond. It's a big book, and I hope to get through it this summer.

What is known as your obsession inside the Fed? I'm probably more engrossed by banking and financial market data than some of my colleagues. I expect to do more of that as the regulatory effort gets underway. I'm a financial markets specialist so I did a lot of work on how problems in banking spilled over into the economy. In the late 1980s, I was in New England and was perfectly placed to do that. I've also done research looking at Japanese banking problems and how it impacted their broader economy and why it took them so long to recover.

Why do financial institutions keep repeating their mistakes?
It's always a different sector of the financial industry that ends up having difficulties. You have problems you haven't had in the past. I don't think regulators and observers were looking at individual mortgages as an area where there would be a big problem.

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