Dorothy Weaver knows what’s what at the Federal Reserve. Not only did she serve as chairwoman of the board at the Federal Reserve Bank of Atlanta’s Miami branch from 1989 to 1994, but her brother-in-law, Richard Fisher, is currently president of the Federal Reserve Bank of Dallas (and has made a name for himself by opposing the Fed’s quantitative easing and low-interest rate policies).
Although Weaver has spent more time in the private sector than in public life – since 1995 she has been principal, CEO, chairwoman and co-founder of Miami-based Collins Capital, an investment management company that manages multimanager, multistrategy funds of hedge funds – she continues to be an active Fed watcher.
Now, with talk of Janet Yellen becoming Federal Reserve chairwoman, Weaver’s thoughts about a woman taking on that top leadership position can assuredly be filed under the title of “current events.”
In a phone interview on Tuesday with ThinkAdvisor, Weaver noted that although she doesn’t know Yellen personally, whether the new Fed chief who replaces Ben Bernanke is a man or a woman, that person’s ability to be a consensus builder will be critical as the central bank’s monetary policymakers operate alongside a Congress that has shown little sign of getting its act together on the debt ceiling debate.
“Ben Bernanke has been consistent in saying monetary policy can only do so much, and it’s not just in response to the current impasse we’re seeing,” Weaver said. “Monetary and fiscal policy have to work together if we’re going to make it to the end game of a robust economy with strong employment in a noninflationary environment.”
Weaver also discussed monetary versus fiscal policy and the Fed's bully pulpit.
Q: You were chairwoman of the board at the Federal Reserve Bank of Atlanta’s branch in Miami while Alan Greenspan was Fed chairman in Washington. What were your big economic and policy challenges at that time?
A: The challenge at that time was inflation. That’s where the Fed was focused – on getting and keeping inflation down. Clearly, we’re in a different environment now.
Q: How would you compare your Fed experience to the current-day Fed environment of quantitative easing and debt-ceiling debates?
A: The Fed’s bully pulpit was extremely important then and continues to be important now. The business community and markets hang on to every word that the Fed says. The Fed feels that it has a role of providing predictability and stability and encouraging productive economic activity, but they recognize that monetary policy alone cannot solve the unemployment problem and other challenges this country faces. Ben Bernanke has been clear that he needs Congress to take a leadership role on fiscal policy because monetary policy can only go so far in terms of addressing unemployment and other problems.
Q: What advice would you give to Janet Yellen if and when she becomes the next Fed chief?
A: [laughs] I wouldn’t be so presumptuous to give her advice. But I certainly think the Fed’s role is going to continue to be extremely important in building the confidence that businesses will need to free cash that’s been growing on their balance sheets. The future of the economy and growth of employment will benefit as corporate America begins to feel there are opportunities to invest in jobs, plants, new equipment and research.
A: No, not solely based on a woman versus a man. But what will be important is Janet Yellen’s leadership and whether she has a more collaborative style of management, and all voices can participate and be heard. This will be especially important with the new Fed nominations to the extent that she is more collaborative and consensus-oriented. She will be dealing with a new board of governors — only two of seven governors will remain in the new year if she moves up to chairman — and President Obama will have five appointments in a single year. After Senate approval, they would serve 14-year terms. That’s purposeful because these appointments don’t coincide with any given presidential administration.
Q: How has your experience at the Fed helped you in your working life?
A: The wonderful thing about running multimanager, multistrategy funds of hedge funds is that I use everything I have learned every day in terms of risks and mispricings. I spent eight years living in Latin America and then Asia, and that has certainly informed my view of the world as the world has grown smaller and smaller. As for my understanding of the Federal Reserve and monetary policy, I see the interrelationships between asset classes. You see how dramatically the equity market responds to any nuanced statement from the Fed. It doesn’t even have to be an action; it can just be an implication that has an impact on the bond and equity markets.
Q: How did you get interested in economics and markets?
A: it came first from my father’s passion for learning and business. I had a vertical learning curve and learned at the dinner table. Then I continued to pursue that vertical learning curve and found opportunities to learn because the world keeps changing. I was attracted to alternative investments because I value preservation of capital, risk mitigation and diversification.
Read more about Dorothy Weaver in What Do Ballistic Missiles, Barbara Bush and Alternative Investments Have in Common? at ThinkAdvisor.