From Stanford Business magazine, Autumn, 2010
Surrounded by photos of himself with presidents and foreign dignitaries and all manner of award plaques and commendations, Richard Fisher, MBA ’75, looks every bit the patrician banker sitting in his palatial office on the 14th floor of the Federal Reserve Bank of Dallas.
But on this day, he calls a visitor’s attention to a small, framed, blue document with faded typing dated 1941. “Lemme tell you what’s cool about this,” he says.
Thus begins a story about how his father, Les Fisher, a native of Queensland, Australia, was denied entry for citizenship into the United States in 1937. “They let my mother into the United States, but when my father first came here he didn’t have the acceptable documents or something,” Fisher says. “So he stayed in Tijuana and would just go back and forth across the border to check on his wife.”
It wasn’t easy, however. The faded document attests to the $8 “head tax” his father paid to walk across the Mexican border to visit his wife in a Los Angeles boarding house.
The son today, tall and immaculately dressed in a dark suit and rimless glasses, seems to be a banker right out of central casting. He has the requisite educational pedigree — Harvard, Oxford, Stanford — but he doesn’t speak in the tortured syntax made famous by former Fed Chairman Alan Greenspan. Fisher takes pride in speaking his mind clearly and honestly, which has earned him a reputation as somewhat of a maverick in the staid circles of the Fed.
As president of the Federal Reserve Bank of Dallas, Fisher, 61, is one of the 17 people who currently make up the Federal Open Market Committee, which is chaired by Ben Bernanke. The FOMC makes decisions regarding interest rates and the nation’s money supply. Fisher dissented from the majority of that committee five times in 2008 when it voted to reduce interest rates, and he was outspoken in his criticism when the Federal Reserve decided to buy $300 billion in U.S. Treasury securities in 2009. It wasn’t his turn to vote on the FOMC this past August when it decided to reinvest principal from other investments into more long-term Treasuries, but he told Stanford Business that he was “skeptical” that it would induce businesses to hire more workers or invest in plant equipment and that he worried that “it might send a signal that we will monetize the fiscal promiscuity of Congress” down the road.
Herb Kelleher, former CEO of Southwest Airlines and deputy chairman of the Federal Reserve Bank of Dallas, said Fisher’s forthrightness is refreshing. “He doesn’t just go along to get along,” Kelleher said. “He is someone who can be iconoclastic in his thinking, but he is also a team player.”
Even before the financial crisis, Fisher was known for his frank, colorful language.
During one of his speeches on the economy, for example, he compared the “hot” service sector to Hollywood actress Scarlett Johansson. Asked about this, he said, “I describe what we are doing in non-PhD economic terms. I guess that makes me different.”
Fisher’s dissenting votes against reducing interest rates were the result of his bone-deep conviction that inflation must be fought at every turn. At the time of those votes, the United States was experiencing significant inflationary pressures. He feared that lower interest rates coupled with massive government spending and deficits eventually would ignite inflation. And maintaining a stable currency is one of the mandates of the central banking system.
“I have dissented more than anybody else over the cost of funds [the federal funds rate],” he said. “But I am a big supporter of Ben Bernanke and his efforts [during the crisis], which I thought were brilliant.”
Fisher was referring specifically to Bernanke’s 2008–2009 efforts to revive interbank lending and to restore confidence in the markets for commercial paper, asset-backed securities, and money market funds. “When the commercial paper market came to a halt, the Fed had to make the market,” he said. “We had to be there to back up the money market mutual funds. That to me was more important than cutting rates to zero.”
James Hackett, chief executive officer of Anadarko Petroleum Corp. and current chairman of the Dallas Fed, said Fisher “brings to the table some unique skills for a bank president. He is very effective in both knowing the business community and in understanding the political apparatus outside of the Federal Reserve, particularly Congress.”
While Fisher supported Bernanke’s efforts to stabilize the banking system, he balked when the Fed decided to start buying $300 billion worth of U.S. Treasury securities earlier last year. Some refer to that as printing money to service the debt — monetizing the debt, as it is called.
“I argued for zero [to be spent buying Treasuries]. I’m just glad it wasn’t more,” he said. “If we are viewed as monetizing these deficits we become Argentina. People will lose faith in the central bank.”
It was bad policy, plain and simple, he said. Obviously, neither he nor the Federal Open Market Committee has any control over the spending habits of Congress, and Fisher is disappointed with both Republicans and Democrats for creating such huge fiscal deficits.
“My generation and the people we put in office, for whom we all voted, have basically stolen from our children, our grandchildren, and our great-grandchildren, and something has to be done about it,” he said. He wants Congress to get its fiscal house in order, and, always the optimist, he believes that the politicians “will dig deep eventually” and solve the problem. He believes that some combination of decreased spending and higher taxes is the answer. “The public has had it, and the Fed is not going to monetize it, so someone has to pull up their socks,” Fisher said.
Throughout history and in many countries when fiscal authorities dig themselves a hole with deficits and other unfunded liabilities, he said, they turn to the central bank to print money and inflate their way out. “Obviously, as a central banker I am very worried that might be something politicians might be tempted to do. I don’t believe anybody on the FOMC will be a party to that.”
In speeches, Fisher has been highly critical of how large some financial institutions have become. These so-called too-big-to-fail institutions are too big to supervise or manage, he said.
“After a certain size and scope are achieved you lose touch. I am an advocate of reducing the size of these large too-big-to-fail institutions, and there should be limits to the amount of leverage they are allowed to employ.”
Fisher was born in Los Angeles in March 1949, about two years after his father became a U.S. citizen. Living expenses were high, so the family moved to Mexico City, where Spanish was the language Fisher learned in school. When his family moved to Miami Beach, he had to repeat fifth grade because his English skills were deficient. When the family moved back to California, Fisher attended South Pasadena Junior High, a school with a unique math curriculum based on a model used at Yale University. He excelled in it, and perhaps because of that — although he doesn’t know for sure — a Philadelphia bank, Girard Trust Co., gave him a scholarship and cash to attend Admiral Farragut Academy, a military-style college preparatory school then located in Pine Beach, N.J.
“My father somehow talked them into giving me money. I don’t know how. I was only in the bank one time, and all I remember is someone sort of patted me on the head and sent me on my way,” he said.
Fisher went next to the U.S. Naval Academy and expected to become a pilot and probably serve in the Vietnam War. “I loved the training, the whole naval discipline thing,” he said. But two years into the program, a professor suggested he was academically gifted enough to attend Harvard College. Also, the notion of him flying jets was unlikely because he had 20-40 eyesight.
Fisher transferred to Harvard, where he worked his way through as a fry cook at night and at a bicycle shop on weekends. After graduating in 1971, he studied Latin American politics at Oxford, where he met his future wife, Nancy. They married in 1973 and came to Stanford.
Even 35 years after graduating from the MBA Program, he can still recite the names of many of his professors. His favorite was George Leland Bach, who taught him economics. Bach “opened my eyes to just the practical aspects of economics,” Fisher said. “If he called on you and you were not precise in your answer, you paid the price.”
It was at Stanford, he said, that he learned that good business decision making involves dealing with uncertainty. “The great value of Stanford was teaching me to think in probabilistic terms, to think in decision trees,” he said. “You want a certain outcome, but you need to think about what happens if that doesn’t occur. That helped guide me through the decisions I made during the financial crisis.”
Fisher’s banking career began at Brown Brothers Harriman & Co. under the tutelage of Robert Roosa, a former senior official of the Federal Reserve and undersecretary of the Treasury, who wouldn’t hire Fisher until he promised that he would one day go into public service. “I am doing that now,” Fisher said. “I owed that to him. He made my career.”
Fisher became one of the “Roosa Boys” (although women were included in the group), specializing in fixed-income investments
and foreign exchanges. Former Federal Reserve Board Chairman
Paul Volcker also had been a Roosa Boy, and because of this connection he and Fisher have remained close friends.
In 1977, Roosa “loaned out” Fisher to work as an assistant to the secretary of the Treasury. President Jimmy Carter had asked Roosa to serve as secretary of the Treasury. Roosa said he couldn’t do it
and told Fisher, “I am sending you instead to work as assistant to the
secretary. I want you to learn how governments can screw up the bond markets.”
Fisher returned to Brown Brothers and New York in 1979. He recalls taking his 3-year-old son on the Staten Island Ferry to see the Statue of Liberty, and thinking as he looked at the Manhattan skyline, “I will never change this place. It is already established. I ought to go to a place with my children and my wife where I might conceivably have an impact and be part of something that has a future, not just a past.”
He chose Dallas, where his wife had previously lived, and persuaded his employer to establish a Dallas office. In 1987, he started his own investment advisory firm, Fisher Capital Management, and throughout the 1990s maintained a fairly high profile in Dallas, accepting appointments to all manner of boards and commissions. He was even talked into running for the U.S. Senate in the 1994 Democratic primary against the politically connected Jim Mattox.
“Beating Jim Mattox was one of the worst things that ever happened in my life, because I ended up being the candidate to run in the general election,” Fisher said. His opponent was Kay Bailey Hutchison, a personal friend, who won. “The process of politics is not something I am good at. Kay was much better than I was.”
Fisher’s father-in-law and “best friend” — the now deceased U.S. Rep. Jim Collins of Dallas — was a conservative Republican, but Fisher served as deputy U.S. trade representative under President Bill Clinton, a Democrat. Today he is careful to say, “I cannot have any politics as a central banker.”
He sold his interest in his investment company in 1997 when he was appointed deputy U.S. trade representative overseeing the implementation of the North American Free Trade Agreement (NAFTA). His fluent Spanish came in handy in negotiations with Mexican counterparts. “I have a special spot in my heart for the Mexicans,” he said, “but that didn’t make me any less tough a negotiator.”
He was working as vice chairman of Kissinger McLarty Associates, an international consulting firm chaired by former Secretary of State Henry Kissinger, when he was appointed president of the Federal Reserve Bank of Dallas on April 4, 2005. The Fed position came open when Robert D. McTeer resigned to become chancellor of the Texas A&M University System.
At the time, Ray Hunt, son of oil mogul H.L. Hunt, was chairman of the board of the Dallas Fed, and he and Fisher served together on the board of EDS Corp. and had been friends for years. “I got a call from him one day, and he asked me about being president of the Federal Reserve Bank of Dallas,” Fisher said. “I hadn’t thought about it. So I said do you think it’s a good idea, and he said yes.”
Fisher is a realist when it comes to the problems facing the United States, but he also remains an optimist, largely because of how far he has come.
“Remember, I am the son of immigrants, and I am a big believer in the way this country works,” he said.
“We will find a solution. I do not despair about the United States.”
by Will Deener
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