Taming A Wild Economy

Roger W. Ferguson Jr. has answered the call at a time when our nation needs him most. Earlier this year, he agreed to serve on President Barack Obama’s Economic Recovery Advisory Board, the influential body charged with providing recommendations for revitalizing America’s battered economy. Ferguson was enlisted to be part of the 15-member task force charged with simplifying the federal tax code and finding ways to recoup the $300 billion in taxes that go uncollected each year.

Ferguson was a sterling choice. A former vice chairman of the Board of Governors of the U.S. Federal Reserve System, he is one of the nation’s leading economists. He is also the president and CEO of TIAA-CREF, one of the world’s largest financial services firms with more than $360 billion in assets. In February, his credentials earned him a coveted spot on the black enterprise list of the 100 Most Powerful Executives in Corporate America.

Editorial Director Alan Hughes recently sat down with Ferguson in TIAA-CREF’s New York City headquarters to discuss the turbulence in the financial markets, the uncertain state of the economy, and projections of when things may turn around.

Black Enterprise: Right now there’s not a lot of investor confidence in the financial markets. When do you think we’ll start seeing sustainable upward movement?

Roger Ferguson: Well, it may take some time before we see real sustainability in the absence of volatility because the markets are being influenced by a number of forces. Recently there have been, I think, as [Federal Reserve Board Chairman] Ben Bernanke said, some hints of turn in the economy. The market is also certainly influenced by the amount of liquidity that is ready to go into investments. There’s a lot of cash on the sidelines.

And obviously, the markets are meant to be very forward looking, so they are thinking about what’s likely to happen over the next several quarters, not just this quarter. There’s uncertainty there, partially around corporate earnings and partially around the state of the economy. So I think even when we get an economy that is clearly on the upswing, we’ll start to see the market move, but I think there will continue to be volatility around that as opposed to sort of a one-way move because there will still be some residual uncertainties.

Some of the president’s critics have talked about too much state involvement in financial services and the automotive manufacturers. For things to turn around is it necessary for the government to be as involved in free enterprise? How much do you think is too much involvement, and at what point should the government let free enterprise be free enterprise?

Well, I think we have to get back to letting free enterprise be free enterprise as soon as we reasonably can. On the other hand, we have to recognize that government got involved in this in order to help some significant financial services firms create a base of stability around their capital and that, I think, was absolutely the right thing to do.

Financial services depend on confidence and that confidence emerges if there is a sense that there is a solid capital base. There’s no question that we do not want the government involved in financial services for a long time, but it was right for the government to step in for a number of cases, to smooth the transition from one state to the next.