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The need to do more to bolster the real economy is one reason Rosengren has taken the unprecedented step of partnering with a national philanthropic collective, Living Cities, to launch a grant competition among midsize cities in Massachusetts, including old Rust Belt towns like Lowell and Pittsfield. The goal is to find the smartest ways to improve the economic health and well-being of lower-income citizens. (The efforts were praised in an April speech by Bernanke as a model for other Fed leaders across the country.) Rosengren lauds the entrepreneurial energy of the large immigrant population in many of these cities and notes that nearly half the grant score will be based on "collaborative" government--quite a message to send to a polarized Washington.
The idea of a Fed president's speaking out so explicitly on political issues, from community development to immigration, is new--and Rosengren isn't the only one doing it. Recently New York Fed president William C. Dudley gave a talk about the too-big-to-fail problem in banking in which he not only made policy prescriptions for how to clean up the financial system but also offered pointed opinions about the culture of banking. Dudley noted a "problem evident within some large financial institutions--the apparent lack of respect for law, regulation and the public trust ... Whether this is due to size and complexity, bad incentives or some other issues is difficult to judge, but it is another critical problem that needs to be addressed." Rarely, if ever, has a Fed leader spoken so frankly about the financial industry. It underscored yet another area in which Congress and the President have failed to lead: the reregulation of the industry in the wake of the financial crisis. If the Fed wants to take on that task, I say more power to it.