Economist Mark Zandi: The Recession’s Hot Wonk

Mark Zandi, the chief economist and co-founder of Moody’s Economy.com was in the midst of a whirlwind day that included two speeches, a panel discussion, a television interview and a visit to the Congressional Budget Office — but he still found time for a little extracurricular research.

In a taxi on the way to the Park Hyatt hotel in Washington, where he was making a presentation to a bank-industry group, Zandi turned to the driver. “How’s business?” he asked.

“It’s slow,” the driver said.

“Is it getting any worse?” Zandi asked.

“No,” the driver said. “It’s just slow.”

Most people would forget that exchange before they got out of the cab. But Zandi, 49, stores conversations like these for future use in congressional briefings and spots on CNBC. As the public face of Economy.com — an economic-forecasting company that he started with his brother Karl and a third partner in 1990 and sold to Moody’s in 2005 for $27 million — Zandi has the job of predicting the economic future and explaining the tumultuous present to clients that range from Wall Street investors and sovereign wealth funds to staffers from the Commerce and Treasury departments. He’s the recession’s ascendant wonk and most improbable celebrity, as likely to pop up in the newspaper or on television as behind Nancy Pelosi during a press conference — sort of a post-housing-bubble Zelig. (See 25 people to blame for the financial crisis.)

He does it all with an almost unnerving sense of calm. He can explain collateralized debt obligations, the obscure minutiae of the housing market and big-picture economic forces in a way that’s clear and practically idiot-proof, and he’s very good at concealing his political agenda, if he has one. Those last two qualities have made him an especially useful figure in Washington, where he’s consulted and quoted by Democrats and Republicans alike. “What he says, people listen to,” says GOP Senator Bob Corker, who cited Zandi’s testimony on the second auto bailout as particularly helpful. Zandi worked as an economic adviser to John McCain during his presidential campaign. His book Financial Shock, published in July 2008, could be seen tucked under the arm of Massachusetts Democrat Barney Frank during the height of the banking meltdown last fall. “He really has the ability to put aside any pre-existing agenda and just talk facts to almost everybody,” Frank says. When asked whether he and Zandi disagree about anything, Frank replies, “Not really.”

For what it’s worth, Zandi says he is a registered Democrat. But he has an instinctive ability to avoid offending anyone, which happens to be a smart business strategy: politicians can cherry-pick from his research to bolster their own agendas; they then invite him to testify on Capitol Hill (he has done so half a dozen times in the past year), which leads to more TV interviews, which boosts business for Economy.com On a recent Thursday in Washington, Zandi spent the first part of the morning presenting his outlook for the U.S. economy to a crowd of Moody’s clients. Standing at a lectern under fluorescent lights, blinking behind his oval spectacles, he said the bank-bailout plan introduced by Treasury Secretary Timothy Geithner to encourage private investors to buy banks’ toxic mortgage assets is a “reasonably good idea” that he thought would work. (Zandi says he would have preferred that the government buy the toxic debt so taxpayers could realize all the upside once the economy recovers.) He believes in aggressive government stimulus as a way to address economic crises, and he likes the package passed by the Obama Administration, although he would have included a payroll-tax holiday and an expansion of the housing tax credit.

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Zandi sketched out his “timeline to recovery,” which sounds fairly optimistic. The stock market bottomed out in the first three months of 2009, he believes. (He’d originally expected this to happen last November; instead it was in March.) Home prices should reach their lowest point by the end of the year. (“I feel very confident about this.”) The fiscal-stimulus program should start to work by this summer. Unemployment will peak in the second quarter of 2010. And economic expansion should begin again in the fall of 2010. “My point is, things can turn pretty quickly,” Zandi said, chuckling. “How’s that for a happy ending?” After the presentation, he was engulfed in a sort of economic-geek circle at the front of the room. Men from the Department of Commerce, Freddie Mac and a real estate investment fund batted questions around: “Has your forecast for home prices changed?” “What about the savings rate?” As he raced out the door, Zandi was stopped by an economist from the Office of the Comptroller of the Currency to talk about the “wealth effect.” (See the best business deals of 2008.)

Zandi says he feels a little funny about all the attention he is getting. He grew up in Philadelphia, the son of an engineering professor at the University of Pennsylvania. He earned a Ph.D. from Penn and worked for Wharton Econometric Forecasting Associates before starting his company. He was photographed for Fortune in 2000 dressed like Rocky, which mortifies him now. “They called me the sexiest economist in America, and that was years ago, when I had hair and body mass and my teeth were shiny.” He lives in Philadelphia, despite his constant need to commute to places like Washington and New York City, because that’s where he grew up and his family’s roots are. He met his wife while she was a graduate student of his father, who brought her home for a congratulatory dinner after she completed her Ph.D. When I ask whether she works, Zandi says, “With three kids and someone like me … can’t do it.” He shakes his head. “She always tells me that I don’t appreciate how hard it is.”

As he rushed through another nondescript Washington office-building lobby, I asked him when he had time to prepare for so many presentations. Zandi shrugged and said, “I don’t have to prepare.” (Point taken — almost everything he says is a variation on what he said the last time.) The event, a panel discussion hosted by the New America Foundation think tank, had already started, but Zandi slid into an empty chair onstage and seamlessly joined a debate about the Obama Administration’s handling of the economy: “The totality of the federal response has been very good. By this time next year, things will be much better.”

From there, he ducked into an empty office to join a Moody’s conference call, in which he was supposed to talk about U.S. home foreclosures. While he was waiting, a gentleman in a chalk-striped suit popped into the room and started chatting to him in another language. “I’m sorry — I don’t speak Persian,” Zandi said. He later explained that his father emigrated from Iran but never taught him Farsi growing up. “So many members of the Iranian community come up to me and speak Farsi,” he said. “There is so much negative attention paid to Iran, they are very interested in someone who is … out there.” The conference call started, and he snapped up the phone.

It was only noon, and Zandi’s world had already begun to resemble an obstacle course, circus edition. As he was preparing to leave for an interview across town for PBS’s Nightly Business Report, someone grabbed his arm and steered him into a room to talk to a woman named Paula, an extremely earnest reporter from the Finnish Broadcasting Company (the “BBC of Finland,” as she put it), who was dressed all in black, with a tight blond ponytail. The lights dimmed, a camera was pointed at them, and Paula started firing off questions about bank nationalizations and Barack Obama’s budget. “In a perfect world, what would you do to save the economy of this nation?” she asked.

“The most important point is, in a time of crisis, there is no way out but for the government to be bold and aggressive,” Zandi said. “Fortunately, I think we are seeing that.”

Paula wrapped up her interview, and Zandi gathered his coat and briefcase.

“Keep up the good work,” Paula said. “You really seem at home in front of the camera.”

Mark Zandi blushed.

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