Federal Reserve Governor Speaks at School of Business

Federal Reserve Board Governors rarely speak publicly.  Since it is even rarer that one visits a university, it was an extraordinary honor to have Governor Warsh on the UAlbany campus to speak to School of Business students, faculty and business leaders. The 30 top wire services were in attendance to cover the speech, the most for any campus event.

Professor Hany Shawky, who has taught finance in the School of Business since 1978, talked about the significance of Warsh’s visit, “The Federal Reserve Board has never been as important in the U.S. economy as it is today.  Any insight that a Federal Reserve Board Governor is willing to give is critically important.  We are in a critical economic time where people are uncertain where the economy will break in the next six months: go into a recession or continue to expand.” 

The Fed had made news earlier that same week by cutting interest rates for the first time in four years. During his talk, Governor Warsh said that confidence is crucial in the current economic situation, “Reduced liquidity conditions in markets today stem from a pullback in investors’ willingness to take risks.”  Though many believe that the subprime market caused the current credit crunch, Warsh doesn’t. He said, “I believe that the problems affecting the subprime-mortgage markets served more as the trigger than the fundamental cause of recent market turmoil and economic uncertainty.”

In the question and answer session following his speech, Warsh responded to a question from Dr. Christophe Faugere, Assistant Professor of Finance, who asked whether there was a direct connection between the troubles of the subprime lending industry and the lowering of interest rates. Warsh responded that the Fed does not make decisions based on one particular sector of the economy, but considers all of the sectors, applying their mandate to ensure economic growth is sustained while making sure inflation is under control.  He added, “We should expect that markets should start to function better.  It is hard to say when that will happen. We will focus on real time indicators.  The remarkable thing about the U.S. economy is that we have a real resilience and dynamism in contrast to Europe and other markets. We have unemployment rates that are the envy of the rest of the world.  The ability of real business people to create new projects requires good policy from the Federal Reserve, Congress and others.”

The event was sponsored by the School of Business’ Center for Institutional Investment Management and facilitated by School of Business Advisory Council member Bob Lazar ’77. 

Federal Reserve Board Governor Kevin Warsh grew up in the Capital District of New York State.  He earned an A.B. in public policy from Stanford, a J.D. from Harvard Law School and worked in the Mergers and Acquisitions Department of Morgan Stanley, before he was tapped for a position at the White House. He served as Special Assistant to the President for Economic Policy and Executive Secretary of the National Economic Council until he took office as a Federal Reserve Board Governor in February of 2006.  At 37, he is the youngest to serve in that capacity.