As president of the Federal Reserve Bank of New York, E. Gerald
Corrigan has been cited as a man who is held in high respect by
For good reason: it is the New York Fed which conducts the System's
open market operations, influencing the money supply and interest
rates through the buying and selling of Treasury securities. Corrigan
also retains a permanent seat on the Federal Open Market Committee,
the Fed's policymaking board. In addition, as someone who has spent
his entire career within the Federal Reserve System, Corrigan's
views on System operations have considerable influence.
It is not just the lengthbut the diversityof his 22-year
Fed career that Corrigan counts as important. In his early years
with the New York Fed he held positions with various departments,
including accounting, computer, research and personnel. "Those were
some of the best things I ever did," Corrigan says in the following
interview, "because those experiences have given me insights I find
incredibly valuable in my current job."
Before becoming president of the New York Fed in January 1985,
Corrigan served as president of the Federal Reserve Bank of Minneapolis
from August 1980 through December 1984years he recalls warmly:
"I still look back with enormous fondness to my relationships at
the Minneapolis Fed, not just with the people in the bank but throughout
Corrigan, who has a master's and a doctorate degree in economics
from Fordham University, began his career with the Fed in 1968,
when he joined the New York Fed as an economist in the domestic
research division. In 1976 he became a vice president of the bank
and in August 1979 he became special assistant to Federal Reserve
Board Chairman Paul Volcker in Washington, D.C. Promoted to senior
vice president of the New York Fed in January 1980, he left the
East Coast later that year to join the Minneapolis Fed.
In the following interview, Corrigan reflects on his career path,
management style, the dynamics of modern international finance and
his years in Minneapolis.
Region: While you were president of the Federal Reserve Bank
of Minneapolis you had a reputation as being a "touch it, feel it, smell
it" policymaker; in other words, hard cold numbers were less meaningful
to you than the personal contacts and some of the anecdote material
of your experience. Is that still true now that you've moved into a
large and more complex arena?
Corrigan: The premise for that question is one that I can understand,
but I think it's a little bit misplaced. In point of fact, I probably
spend more time with the numbers and hard analysis than most policymakers;
indeed, a lot more time. And as many of my former colleagues at the Minneapolis
Fed will remember, that's one of the reasons I write all own speeches
from scratch. I think that is a way to bring to bear a very rigorous form
of mental discipline and thought process.
Having said that, it is also true that I do tend to reach out to virtually
any source I can find for impressions, anecdotes and insights. I view
that not as substitute for hard analysis, but as a supplement to it. I
think there are many, many occasions in which the insights we get from
that outreach process really can be helpful in trying to read between
the lines of the numbers and the hard analysis. I think that is true in
general, but it is particularly true in the context of dealing with here-and-now
problems that might, in the eyes of some, have crisis-like characteristics.
When confronted with events like a stock market decline or even a power
blackoutas we experienced in New York in early Augustthat
network of contacts can be especially valuable.
Region: In the same vein, you had
reputation as being a hands-on manager, somebody who knew what was going
on at every operational level of the bank, regardless of whether the action
was in the priced service area, the research department or automation.
Given the much greater size of the New York Fed, you must have to rely
much more on delegation and second- or third-hand information. Is that
a hard adjustment to make?
Corrigan: There is something to
the suggestion that you can't teach old dogs new tricks. And I don't think
that I'll ever fully divest myself of some of those traits and the way
I approach things. Some of that, of course, does reflect the fact that
over the years I've had the good fortune of working in a number of very
varied areas. In my early years at the New York Fed I believe I worked
in 10 or so different departments. Part of what you see here is a reflection
of the scope of experience I've had in the Federal Reserve over the years.
For example, when I was president of the Federal Reserve Bank of Minneapolis
I served, at one point, as chairman of the Federal Reserve's Pricing Policy
Committee. By doing so, I experienced a whole raft of things I would ordinarily
not have come in contact with. And that kind of experience sticks.
So I do take some satisfaction from the fact that I have a reasonable
working knowledge of most things we do as central bankers. Having said
that, there is no question that the New York Fed is much more complex
than most other Federal Reserve Banks. Our scope and our activities are
much broader, and, of course, thatby its very naturedoes mean
that we have to have a much better approach to screening and establishing
our own priorities.
One thing that helps that process, at least from my perspective, is
that the vast majority of the people in the New York Fed are people I've
know for years; I've worked with them for years. They know me and I know
them and that helps. But if you ask me, point blank, if I at times would
be better off by delegating more, I think the answer would be yesI
would concede that point.
Region: In less than 10 years you've
gone from being a Reserve Bank vice presidentpretty much of an insiderto
being one of the more significant players on domestic and international
economic issues. What's enabled you to make that transition with as few
slips of the foot (or tongue) as you have?
Corrigan: Part of the answer is
that I've literally grown up in the Federal Reserve. I was very fortunate
at every step of my career to be associated with people for whom I have
Even in my earliest days here in New York, there were people with whom
I came into contact who were old-school central bankers. And they had
a very strong view and tradition of the essence of central banking. They
stressed the need to be conservative in your approach to issuesconservative
meaning carefuland discreet in the conduct of the business of central
banking. Those people had a big impact on me.
Much has been said about my long association with Paul Volcker, and
obviously I learned a lot from him. But even later on, I've had the great
privilege of counting among my friends and colleagues some of the most
prominent of the international central bankers. In their presence, you
observe, you see, you learn, and I think that experiencein its totalityhas
really helped me make the transition.
I'm under no illusions that the transition hasn't involved some false
steps along the way. Sure it has. But as I said, if I had to pick one
thing that has helped me make it reasonably well, I think it would be
the things that I have seen in other people that I've respected and the
efforts that I've made to try to emulate them.
Region: In spite of a record that
must look pretty near perfect to an outsider, there must be some things
that, in hindsight, you'd like to do over. What might some of those things
Corrigan: Well, interestingly enough,
if you take the broad sweep, I don't think there is anything major I would
do differently. There was a time, for example, in the '70'safter
I had been lifted out of the research department and related activitiesthat
I spent the better part of seven years in the operational and administrative
part of the bank here in New York. I was a bit uneasy then. There were
moments when I found that experience frustrating and I wasn't quite sure
how it all would come together. It didn't always seem to me to make a
whole lot of sense for somebody who considered himself an economist to
be running the accounting department, or the computer department.
However, in retrospect, those were some of the best things I ever did,
because those experiences have given me insights that I find incredibly
valuable in my current job. For example, I've made the point several times
that in terms of de novo learning, I've gotten as much from my
association with the accounting department as just about anything I've
Certainly, I would put my four years at the Minneapolis Fed in that
same category. It was a tremendous experience for me in every respect
and I still look back at it with great fondness, not only for the institution
itself but for the opportunity I had to learn a fair amount about a large
segment of our economic system that I otherwise would never have had the
chance to begin to understand.
There may have been some frustrations along the way, but again, I think
I can say with a very, very straight face, that if I had to do it all
over I wouldn't change much. Now, that's not to say that I have any illusions
of batting one thousand or anything close to it. Obviously I can think
of individual instances or decisions or episodes when, with the benefit
of hindsight and/or more experience, I might have done some things differently.
One of the things I still have to work at is trying to strengthen working
relationships with people. I, in particular, probably have to work harder
at being a little more patient. So, there are always things I'd like to
improve, but as I said, if I had to rewrite the script I wouldn't change
much in substance.
Region: The Fed has always been
a dynamic institution, and perhaps one of the reasons it has been a successful
institution is that it has managed change without losing its essential
institutional presence. What are the significant changes you've experienced
during your tenure at the Fed?
Corrigan: If you go back over the
20 years or so that I've been at the Fed, I think the biggest single change
is the context within which the Federal Reserve operates. The institution
is much more visible, much more in the public eye and the public mind
today than it was 20 years ago.
There's a variety of reasons why that is true, but for these purposes
they're relatively unimportant. Clearly, however, our expanded visibility
is a very, very major change. And the change by and large is for the good,
because it works in the direction of making the institution function even
better. But it's also a challenge. It does mean that the premium on "getting
it right" is higher. It means the premium on being sensitive to the environment
in which we operate is higher. And it means that our sensitivities to
all the dimensions of that environment have to be greater. Still, to many
observers, the Federal Reserve is something of an enigma. In a way, that
will always be true, because some of the things we do are so complex that
the public at large has difficulty associating with the nuances.
There are other changes. Certainly our relationship with the rest of
the world, both as a central bank and a nation, has changed profoundly
over the last 20 years. We see that in many facets of what we do and how
we do it, whether it's in our bank regulations work or payments system
or, certainly, in monetary policy. That would be the second of the truly
major changes. You could go on to others, including the change in the
technological environment and soon, but I think the expanded visibility
and the change in the international setting in which we operate are the
most profound changes in the past 20 years.
Region: How about the next 10 years?
Corrigan: It's awfully hard to judge
the environment over the next 10 yearsI think the events in the
Mideast since early August provide a very forceful reminder of that. But
I do think that the international setting probably will continue to have
a profound impact on what we do, how we do it, our priorities, and how
we manage our collective affairs.
I also think the monetary policy environmentincluding its international
dimensionwill continue to get more complex. The linkages between
policy and both the economy at large and the functioning of the financial
system will be changed by technological and other considerations. Responsibilities
in the area of bank supervision also will continue to undergo major changes,
partly because the banking and financial system itself is going to undergo
I can't claim to be clairvoyant, but I certainly think that it is pretty
well assured that the environment will continue to become more complex
and the international side will continue to expand rather than shrink.
I view all these things as making life interesting, making for new challenges,
and as I like to say, making for an interestingif not funenvironment
for us to work in. But it's not going to be easy.
Region: How do you see the developments
in Eastern Europe affecting our financial markets?
Corrigan: If any or all of the Eastern
European countriesto say nothing of the Soviet Union and China and
the developing worldare really going to successfully make the change
to dynamic, market-oriented economies with substantial gains in standards
of living, one thing we know, without a doubt, is that they will require
capital flows from the rest of the world.
Now, when you start out in a world that, arguably, is already relatively
short on savings, and you superimpose upon it further net increases in
demand for savings, there can be some very important implications for
the global economy. It is not inconceivable, for examplelooking
at the global supply of savings and the demands for those savingsthat
these developments might mean that for at least several years real interest
rates will tend to be higher than they otherwise might have been. That's
one clear channel within which these developments can have important implications
on a global scale. Another, of course, is the trading system. I think
it is quite clear that for the developing countries and Eastern European
countriesand they're quite differentone of the necessary,
but not sufficient, conditions for success is that they develop markets
for the export of goods and services. That has to occur.
So, whether it's in terms of trade in hard goods or flows of capital
and savings, the developments in these countries will have implications
well beyond their own borders. And this will be another of those phenomena
that will be a major issue, I suspect, certainly through the first half
of the '90s and perhaps beyond that.
Region: As a percentage of total
staff (and this is an important question for the folks in Minneapolis)
which Reserve BankMinneapolis or New Yorkhas better softball
Corrigan: Well, that's a relatively
easy question to answer. So long as Scott Dake is employed by the Federal
Reserve Bank of Minneapolis, I have to give the advantage to Minneapolis.
But if Scott leaves, I reserve the right to reevaluate my answer.
Region: In your earlier career at the
New York Fed, you were personnel officer and developed considerable expertise
in that area. What kind of personnel changes do you see coming for Reserve
Banksin terms of staff qualifications? Is the Fed going to continue
to be a "prestige" employer and be able to attract the staff it needsat
least in markets like New York?
Corrigan: You will continue to see
the kinds of changes in the composition of the work force pretty much
across the Federal Reserve System that we've seen in recent years. There
will be a continued shift toward more so-called professional people, more
so-called technical people, and higher levels of technical sophistication
across the board. I think that's baked in the cake, and that grows out
of some of those things I talked about before in terms of the context
in which we operate.
These changes bring with them two sets of challenges. First, I think
it's safe to say that the task of successfully managing such a workforce
is more difficult. It's harder to measure comparative performance, it's
harder to measure output, it's harder to judge what's good and what's
not so good. I think that's a very big challenge in itself. Adjusting
our approach to management in a way that is sensitive to the changing
characteristics of what we're doing, the characteristics of the work force
... that's a very big challenge.
Second, I'm actually quite optimistic about our institutions being able
to attract and retain top quality people. This, in turn, goes back to
part of what I said earlier: it's one of the advantages of expanded visibility,
it's one of the advantages of a challenging environment. I know that our
experience at the New York Fed in the last several years in terms of recruiting
has been sensational, absolutely sensational. Our intake of highly qualified
young people from the universities is gangbusters. Our most recent experience
in recruiting economists has been terrific. We've had a very strong pattern
in terms of recruiting lawyers for several years running. And, as you
know very well, it's not because we overpay them.
I make it my business to meet regularly with as many of these young
people as I can. I try, for example, to have a dinner every month with
15 or 20 of them. There's just no question in my mind that at least at
this particular point in time there is a certain attraction growing out
of what we are and what we do, growing out of the fact that the institution
as a whole does have a good reputation. Now, we're going to have to work
very hard to preserve that, but if we do I'm quite confident that our
abilityeven in this marketplaceto attract very capable young
people will be preserved. I think the bigger challenge, in some ways,
is on the retention side. Getting them here is one thing, but keeping
them challenged and motivated, keeping them feeling that they're contributing,
that's what's really important. The retention issue, if anything, is larger
than the attraction issue.
Region: At one time you expressed
a personal desire to own a piece of a trout stream in Montana. Is that
still a dreamor has your eastern anchor sunk so deep that the dream
has become a trout stream in Vermont?
Corrigan: I still have very strong
ties with Montana. As a matter of fact, not a year has passed when I haven't
gotten out to Montana at least once, and sometimes twice. In fact, I just
spent a week there earlier this month [August]. My affection for that
part of the country has actually grown, and I still maintain close personal
relationships with people I first met when I joined the bank of Minneapolis,
including some of the former directors of the bank. On my various trips
to Montana, I always take a little time to check out the real estate situation,
and while I have not done it yet, I'm certain that at some point I'll
buy a condo at Big Sky or a piece of property out there.
Region: What have been the formative
experiences of your lifeboth before and since you've come to the
Corrigan: First of all, I grew up
in an environmentboth family and other-wisethat put a premium,
I guess you'd say, on hard work. That was something that people just took
for granted. I think that it's also more and more clear to me, through
the passage of time, that my academic training in college had a big impact
that I didn't recognize then. I had the good fortune, both in college
and graduate school, to attend Jesuit universities. And back then we were
required to take a three-hour course every semester in philosophy. I liked
it then, believe it or not, I really did. But in retrospect I have even
more appreciation that that kind of training, in the great liberal arts
tradition, was extremely valuable in terms of learning how to think.
The other thing I would single out I touched on before: whether it was
by design or accident, I had the good fortune in my first decade in the
Federal Reserve of working in many different departments and areas of
this bank. That has, again, turned out to be incredibly valuable. This
really shows through when there's a serious problem in the financial systemdomestically
or internationally. There are many insights that I derive by second nature
because I know how things really work. And knowing how they work is obviously
enormously helpful in figuring out how to deal with a problem. So I'd
put that high on the list. And I try to impress that on the young persons
that work here, too: Breadth of exposure really is a big plus.
Region: Finally, any further comments
on any other topics?
Corrigan: I touched on this before,
but I still look back with enormous fondness to my relationships at the
Minneapolis Fed, not just with the people in the bank but throughout the
district. I always had, and still do have, a very special feeling for
the directors that I had the good fortune to work with when I was at the
bank. Those relationships, both professional and personal, were super.
Those years will always claim a very special place in my mind and my heart.
Consistent with that, I observe the continuing contribution of the bank
under Gary's leadership in many, many areas. Clearly the intellectual
leadership the bank providesin part from Gary personally, but also
through the research departmentcontinues to be exemplary. But I
also see, time and again, where critical working groups and task forces
for Systemwide issues are involved, the contribution from the Minneapolis
Fed to System endeavors is distinctly disproportional, in both qualitative
and quantitative terms. That pleases me no end, but it doesn't surprise
Region: Thank you, Mr. Corrigan.