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Boston Fed chief embraces advocacy role

Rosengren a frequent voice for strong action

By Beth Healy
Globe Staff / August 9, 2012
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Eric Rosengren has made speaking out part of his job at the normally staid Federal Reserve Bank.

Just a few months after being named president of the Boston Fed in 2007, he cast the lone vote urging the central bank’s board to take measures to head off a credit crunch. Since the recession, he has pressed for more help to ease the housing crisis and to battle poverty.

Dissatisfied with the Fed’s decision last week not to act to boost the economy, Rosengren ratcheted up his public message in recent days in an unusual series of media interviews from the Globe to ­CNBC.

“He has a tradition of speaking his own mind,” said Nick Perna, an economist who teaches at Yale and has worked at the Fed. “It’s important for him to speak out on this. If he doesn’t, who does?”

Rosengren, 55, is worried about the nation’s 8.3 percent unemployment rate, colleagues say, and wants the Fed to do all it can to help people who are struggling. He is urging his Fed colleagues to ignore election year politics and buy up more bonds to drive down interest rates and stimulate growth.

It is true to form for the affable Ridgefield, N.J., native, who’s known for being more interested in the real world and its problems than in statistical models.

Rosengren spent his first summer after graduating from Colby College in Maine riding with truckers in Australia to help craft safety regulations. As a graduate student at the University of Wisconsin, he focused on public policy, and helped teach a class where students modeled how to help banks survive systemic shocks.

These days, Rosengren’s public schedule reflects a broad set of influences on his thinking, from powerful business people to the heads of nonprofits. This summer he has spoken with executives of Fidelity Investments and MassMutual, and with New England Patriots owner Robert Kraft. He’s also had meetings with the president of The Home for Little Wanderers and the Asian Community Development Corp.

Rosengren has spent his entire career at the Boston Fed, joining in 1985 after receiving his Ph.D. in economics, and notably spent time researching New England’s real estate bust of the 1980s and Japan’s 1990s banking crisis. He oversaw regulation and the flow of money to the Fed banks before the local board named him president, a $350,400-a-year post. Last summer he was appointed to a second five-year term.

“I was very, very pleased to see Eric come out with his comments,’’ said Roger Berkowitz , chief executive of Legal Sea Foods and an independent director of the Boston Fed. “He’s a very principled guy. He wasn’t going to sit by and watch things go, status quo, without saying anything.”

His tenure as Boston Fed president has so far been defined by the financial crisis. He came to the post when the economy’s problems were gathering steam. The subprime mortgage disaster was starting to rear its head; two Bear Stearns hedge funds that invested in risky mortgage securities failed. Within months, Rosengren was a lone wolf calling for the central bank to take aggressive action to combat rocky financial markets and falling home prices.

Since then, he has taken public stands on housing, poverty, and the shortage of skilled workers. For instance, earlier this year, Rosengren urged Fannie Mae and Freddie Mac to adopt policies to cut the number of vacant properties resulting from foreclosures. He suggested that the housing agencies make it easier for developers to buy empty properties and rent them out. He also has said banks should make it easier for people struggling with their mortgages to refinance.

Rosengren has called on the Fed as well as the Obama administration and Congress to pursue policies that would help stimulate small business hiring as well. And he has warned against tightening government spending in the United States and abroad, at a time when economies are still struggling.

“I think we have to be careful not to go the austerity route too quickly,” Rosengren said last year. Strategies for deficit-cutting, he added, should come “when we get closer to full employment.”

Activism by Federal Reserve Bank presidents, although still unusual, has become more common in recent years, Fed watchers say, and Boston has had its share of outspoken chiefs.

Frank Morris, who led the Boston Fed from 1968 to 1988, famously opposed Paul Volcker on interest rates in 1982, arguing that higher rates were holding back a economy in recession. In the 1990s, Richard Syron used his leverage at the Boston Fed to commission a study on racial discrimination in mortgage lending, which contributed to anti-redlining rules around the nation.

Overseeing the Boston Fed has given Rosengren a voice on the national stage as a member of the Federal Open Market Committee, the central bank’s main policy arm, which is chaired by Ben Bernanke. Rosengren is currently a nonvoting member of the panel (the posts rotate) and will not have a vote again until next year. So for now he can only influence the committee through advice and opinion.

“The Federal Reserve Bank presidents are much more vocal than they’ve ever been, both within the closed doors of the FOMC sessions and outside,’’ said Con Hurley, a former assistant general counsel to the Fed Board of Governors, and now director of Boston University’s Morin Center for Banking and Financial Law. “That’s a good thing.”

Critics say Rosengren’s proposed “quantitative easing” — buying up Treasuries and mortgage-backed securities to free up cash at banks so they will lend more to consumers and businesses — won’t help the economy and could lead to inflation. Others sense that Bernanke doesn’t want to take any action, fearing it could influence the presidential election.

But Rosengren, along with his counterpart at the Chicago Fed, Charles Evans, argue that the country can tolerate a bit more inflation — as it’s still below the 2 percent target rate — especially if it means stimulating economic growth. Evans has been advocating a so-called 7/3 policy, suggesting it’s worth spurring growth to push unemployment below 7 percent, so long as inflation stays below 3 percent.

To some people, Rosengren’s remarks this week were more scripted than radical, and perhaps not out of step with the message Bernanke has been sounding on the still-fragile economy.

“Maybe Eric can persuade other members of the FOMC to see his way,’’ said Perna, the bank economist who once worked at the Fed. “It’s easier for him to do it than Bernanke.”

Beth Healy can be reached at

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