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Richmond Fed’s Lacker sees workforce key driver of economic development

Banking & Finance
Chuck Crumbo
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From the Dec. 5-18, 2016 print issue of Columbia Regional Business Report

Having a workforce trained and ready to fill new jobs tops the list of needs for companies looking to expand operations in the Southeast, says Jeff Lacker, president of the Federal Reserve Bank of Richmond.

Lacker, an economist who has been the chief of the Fifth Federal Reserve District since 2004, said South Carolina has enjoyed strong economic growth in recent years largely due to the investment of automotive companies like BMW, which began building cars in 1994 at its first U.S. plant in Spartanburg County.

LackerAlso, having access to ports at Charleston and Savannah has helped boost manufacturing, Lacker said in an interview with the Columbia Regional Business Report during a recent visit to Columbia.

“To sustain this kind of performance, or at least staying no worse than par in terms of employment growth, is going to require you to innovate, to prepare and train your workforce,” said Lacker, whose Richmond, Va.-headquartered agency serves the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia.

Ten to 20 years ago, the key drivers in recruiting new companies were tax breaks that state and local governments offered as well as the quality of the local business climate, Lacker said.

However, what firms today are asking for first is workforce, said Lacker, who was an assistant professor of economics at the Krannert School of Management at Purdue University before joining the Fed in 1989.

The Fed’s primary job is to set monetary policy with a dual mandate to maximize employment and keep inflation in check, and it also supervises and regulates banks, systemically important financial institutions, and performs substantial economic research.

However, it has found itself lately to be a target of critics who say the central bank’s management lacks diversity.

A report by the Brookings Institute found there have been 134 different presidents of Fed regional banks, and none have been African-American or Latino. Until 2009, there had never been a non-white Fed district chief until current President Neel Kashkari and his immediate predecessor, Narayana Kocherlakota, served as presidents of the Minneapolis Fed.

In addition, eight of the 12 regional banks have never had a woman president. There have been only six women to serve as district presidents in history, and half of them have been president of the Cleveland Fed.

“Federal Regional Bank Presidents are important: they vote to determine the nation’s monetary policy, have significant authority over bank regulation, and lead on-the-ground teams of regulators and supervisors for our nation’s banks, bank holding companies and systemically important financial institutions,” the Brookings study said. “Their banks have a combined $3 billion operating budget, and together oversee the largest economics research program in America.”

Despite the criticism, Lacker said he thinks the structure and governance of the Fed is effective today because the “considerations the founders wrestled with are all still relevant.”

The founders of the Fed wanted to ensure there was a diversity of views and that the nation’s different regional economies were well-represented, Lacker said.

That’s one reason why he recently visited the Columbia area to meet with area business leaders and gauge local economic challenges. The Richmond Fed’s tie to the Midlands and South Carolina is Robert Hill, CEO of South State Corp., who’s a board director.

 As far as promoting more diversity in key leadership positions of the agency, Lacker noted that while a Ph.D. is not required for the job, he and seven other regional presidents do have doctorates in economics.

By contrast, just 2% of doctoral candidates in economics at the top 100 universities in the United States are African Americans, Lacker noted.

“I think we have a record on diversity that I can defend,” Lacker said. “We have come a long way and we have made a substantial amount of progress.”

Reach Chuck Crumbo at 803-726-7542.

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