Dallas Federal Reserve President Richard Fisher spoke with FOX Business Network’s (FBN) Maria Bartiromo during the debut of Opening Bell with Maria Bartiromo this morning. Fisher spoke about tapering, saying, “I am in favor of” tapering $10 billion per meeting and that “we have plenty of liquidity sitting on the sideline, gas tank is full and there is no need to keep adding to it.” Fisher went on to say, “I would have liked to not have done QE3 in the first place that was a committee decision.” Fisher said, “I am very happy with doing this in the measure of steps which Janet Yellen has spoken about recently and I am in full accord on that front.”
Excerpts from the report are below.
Richard Fisher On $10 billion taper per meeting:
“That is certainly what I am in favor of, you know, I can only speak for myself. We have plenty of liquidity sitting on the sideline, gas tank is full and there is no need to keep adding to it. I would have liked to not have done QE3 in the first place that was a committee decision. I am very happy again with the sign we are moving in the right direction and I am very happy with doing this in the measure of steps which Janet Yellen has spoken about recently and I am in full accord on that front.”
Richard Fisher On Federal Reserve Chair Janet Yellen:
“Well we are going to have our first meeting with her as chairperson and I think she will carry forward the good example set by Ben Bernanke, listening to everybody at the table whether we have votes or don’t have votes and very much trying to agree on a unanimous – if possible – decision on how we should proceed.”
On the minimum wage increase:
“An economist would tell you if you raise the price of something you might have a cut back in demand unless that demand surges, so from an economic standpoint that’s the perception. I hesitate to get involved in politics.”
On fiscal policy:
“Democrat or Republican, the Fed has done so much to make capital available and cheap, they should be thinking, both of them, at all times, how do we put the American people back to work? How do we incent businesses to take advantage of what the Federal Reserve has made possible to create real jobs, not just to encourage financial speculation? If they would just think that way, get rid of all the other issues and focus that way, jobs is the route to dignity for any American. Everybody wants to work. No one wants to be on the dole. So put the American people back to work. Take advantage of what the Fed has presented.”
Transcript:
MARIA BARTIROMO, FBN HOST: The U.S. economy hitting a slow patch to start the year and the latest reports indicate the harsh winter may be to blame.
Goldman Sachs Group Inc (NYSE:GS) says more than half of the slowdown can be attributed to the deep freeze. But my next guest does not think it should affect the Fed’s tapering plans at all. Dallas Federal Reserve president Richard fisher joins us right now in an exclusive.
Richard Fisher, always nice to have you on the program. Thank you so much for joining us, good to see you.
RICHARD FISHER, DALLAS FED PRESIDENT: Thank you, Maria, and I’ll tell you, I agree with Mario Gabelli completely, it’s an honor to be on your first show.
BARTIROMO: You’re so sweet. Thank you so much, Richard.
So let me talk to you a little about what’s going on in this economy. How does it feel to you? We had the 2008 transcripts out, as you know, over the weekend, which everybody has been poring over. How would you characterize where we are today?
FISHER: Well, I think for the sign, it’s positive and things are picking up and the attitude of business leaders I speak to is much more positive, encouraged by, of course, what’s happened in the equity markets and elsewhere. There’s a more positive tone and a less pessimistic thing than we were before.
We’re still not seeing employment being driven to the degree that we would like to see at the FOMC, but it’s definitely improved, Maria. We’ve recovered over 90 percent of the jobs lost in the Great Recession and we’re moving forward; I think that’s the important point.
BARTIROMO: So what do you think —
FISHER: Without inflationary pressure.
BARTIROMO: Yes, what do you think it’s going to take to start getting that employment really churning out some sustainable, strong job creation?
FISHER: A sensible, fiscal and regulatory policy. There’s so much monetary accommodation out there; money is still dirt cheap. There’s enormous amount of reserves sitting on the sidelines. They have to be incented to use this and the banks want to lend.
They have well over $2.75 trillion in reserves on their own balance sheets or with us at the Federal Reserve Banks. People have to be incented to put that stuff back to work and right now there’s no fiscal guidance although the tone is better. We don’t know what taxes are going to be, spending is going to be and everybody complains about regulatory overload.
So it’s up to the fiscal authorities now. I think the Fed has done plenty, if not too much.
BARTIROMO: Yes, listen, I think you’ve been singing this song for a while.
Do you think we are actually going to see fiscal stimulus, a change in tactics? Anything that we can get our arms around?
FISHER: I feel like Elton John, you’ve got to sing “Benny and the Jets” every single time you perform, and the message I hope will get through.
But here’s the point. You can’t count on the Federal Reserve to continue along this path. If anything, as you know, we’ve been tapering back. It’s up to the fiscal authorities. They need to grow up and make some serious decisions.
BARTIROMO: So tell me about the tapering, Richard, as much as you can. You were down to $65 billion in bond buying a month. Is this going to a consistent take it back $10 billion every meeting?
FISHER: Well, that is certainly what I’m in favor of. You know, Maria, I can only speak for myself.
We have plenty of liquidity sitting on the sidelines, the gas tank is full and there’s no need to keep adding to it. I would have liked not to have done QE3 in the first place, that was the committee decision.
I’m very happy again with the sign. We’re moving in the right direction and I’m very happy with doing this in the measured steps of which Janet Yellen has spoken about recently and I’m in full accord on that front.
BARTIROMO: How has the tone changed within the Fed with Janet Yellen now in the chairman’s seat?
FISHER: Well, we’re going to have our first meeting with her as chairperson and I think she will carry forward the good example set by Ben Bernanke, listening to everybody at the table, whether we have votes or we don’t have votes, and very much trying to agree on a unanimous if possible decision on how we should proceed.
But we haven’t had our first meeting with Janet at the helm yet, but I, as you know, am very fond of her and I expect it’ll continue in that direction —
BARTIROMO: Yes, you said that —
FISHER: — listening carefully.
BARTIROMO: You’ve said that a number of times.
In terms of inflation, Richard, at this point, what are the main important metrics to look at to get a sense of, in fact, if we’re seeing a resurgence of inflation, is it wage pressure, is it something else that you look at?
What else are your most important metrics?
FISHER: Well, my most important metric is what we at the Dallas Fed calculate, what’s called a trim mean on the PCE, the personal consumption expenditure, it’s kicked up a tiny bit, but not much. It’s running about a 1.4 percent run rate for the 12-month period.
And we’ve found that to be a pretty reliable indicator. We’re seeing in certain areas, particularly in my district, in the higher growth districts, severe labor shortages, it’s being reflected in some prices but the prices are not out of control.
So listen carefully to what’s going on in the private sector and secondly, observe this trim mean measure which I find to be the most reliable of all.
BARTIROMO: Well, that differentiates you from so many, because you’re actually in touch with business people all the time. You were a business guy before you actually stepped into the Fed, into the Fed role.
And you feel that, you know, the issue with business, and correct me if I’m wrong, is, yes, sure, they’re sitting on this cash and there have been great situations in terms of a balance sheet, best in a long time, but they’re not necessarily creating jobs. They’re buying back stock and they’re increasing dividends, right?
FISHER: Yes, you’re right, Maria, and you would be doing the same thing. You want to be confident in the future. What will give you better certainty, you have to have some visibility to the future.
Again, they don’t know what fiscal policy is going to be. They have no idea and then they keep seeing more and more regulatory overload. So that diminishes confidence.
I think the vision for Europe and for Japan and others have lifted somewhat. There are some issues with the emerging countries, but our businesses are ready to go, they just need to be incented to put that money to work. I think that’s the principal inhibitor.
BARTIROMO: All right. We’re going to take a short break, Richard Fisher, and then Mario Gabelli is going to jump in as well. We’re going to talk minimum wage, a hot topic right now.
We’ll also get Fed President Fisher’s take on that, as well as the upcoming meeting on the Senate and Janet Yellen testifying on Thursday.
(COMMERCIAL BREAK)
FISHER: You’ve got to start somewhere. In my case obviously I didn’t end up there, but I think we have to consider that as well.
BARTIROMO: I love it. My first job was a coat check girl.
MARIO GABELLI: And mine was a caddy and if they had the minimum wage, it would have sped up golf.
(LAUGHTER)
BARTIROMO: Richard, knows something about that.
You want to jump in and ask Richard a question.
GABELLI: Well, the question is the following, and we have to echo your comments about fiscal policy and regularly places as a pre-condition to really reinstill confidence.
But what can happen in government given the fact this is an election year, do we have to wait until 2016 or do we get some — 2015, or do we have to get some kind of dynamics coming out in the summer that says, hey, 2015 will be OK?
FISHER: Yes, Mario, we don’t like it at the Fed when they interfere in our business and I’m not an elected official —
GABELLI: I got it. Let me ask you — let me reverse the question —
BARTIROMO: By the way, I just want to say, we’re going to Majority Leader Eric Cantor on the show in about 10 minutes for an exclusive, so we’ll get into the possibility —
(CROSSTALK)
FISHER: Maria, if I can just say — set that aside. Here is the point.
Democrat or Republican, the Fed has done so much to make capital available and cheap, they should be thinking, both of them, at all times, how do we put the American people back to work? How do we incent businesses to take advantage of what the Federal Reserve has made possible to create real jobs, not just to encourage financial speculation?
If they would just think that way, get rid of all the other issues and focus that way, jobs is the route to dignity for any American. Everybody wants to work. No one wants to be on the dole.
So put the American people back to work. Take advantage of —
BARTIROMO: I like that.
FISHER: — what the Fed has presented.
BARTIROMO: Jobs the route to dignity, I like that quote a lot.
Real quick, tell us how to do it, Richard. How do you do it, then?
GABELLI: Yes.
FISHER: That’s up to these people to figure out the incentives. But I’ll — you know, one thing I’ve been arguing, is we still have a tax and spend structure that’s still pre-end of Cold War, layer after layer, lobby after lobby, whether it’s — whatever cause you care for.
And they need to wipe the slate clean and get started all over again. I think Simpson and Bowles were right and they’ve got to figure out a way again to incent people, businesses, job creators, to put the American people back to work. That’s all I care about.
GABELLI: Assuming they do that and assuming the economy picks up as I think it will, particularly in the private sector, how do you exit?
Do you think your fire exits for monetary policy have been tested and retested, and will somebody will be able to pull the trigger at the right time?
FISHER: I think we’ve thought this through very, very thoroughly. Of course it’s theoretical at this juncture. I have high confidence in my colleagues and those that will succeed us as they go through time.
But Mario, I argued this when I argued against QE3 and in fact when I argued against cutting the rate to zero. My point was the way the financial plumbing system works, we needed to focus on that and not just focus only on the interbank lending rate or the Fed’s fund rate, because working an exit on that front would be extremely difficult.
Once we had normalized the credit spreads on the asset purchase side, which I was in favor of initially of course, supported the first two rounds, once we had normalized credit spreads, then we would have a natural exit point.
And by the way, we’ve overshot that, in my opinion. The spreads are very narrow; they’re off a low nominal base and that’s why I’m in favor of continuing to pare back the rate of purchases that we’ve been performing.
BARTIROMO: The Dallas Fed is going to be releasing that Fed survey in just a few minutes and we are going to talk with you about it.
But let me just get your take on these documents that were released, Richard, over the weekend, from 2008, we were talking about this earlier, that a lot of people did not expect that it was going to be as bad as it ended up being.
Let me ask you this, when you said, look, it’s probably not going to be deep, deep recession, that was before Lehman collapsed.
Did things worsen considerably after Lehman went down?
FISHER: You know, even in January, Maria, if you look at the transcripts, I was pessimistic on the economic growth picture in the real economy. In fact, I was saying at the end of the year, I expected growth to be zero. As we — that was pre-Lehman. Now, none of us saw Lehman coming. We did see, again, some problems with the intermediation of the marketplace. I talked about it, Eric Rosengren talked about it. Hawk or dove doesn’t matter. But that just really blindsided us.
And then post-Lehman, obviously, whatever inflationary pressures were building up towards the end of the summer — and they were significant — evaporated and then the focus was purely on how do we save the financial system.
So, I think that’s what people should be looking at. It’s easy to go back, armchair quarterback and say they were wrong, Ben was wrong, Richard was wrong, et cetera.
That’s not the point, you had serious people looking at the economy, worried about the growth outlook and at the same time seeing some inflationary pressure all the way through August and then someone pulled the legs out from underneath the table.
And that’s when we went to work and I think Ben deserves enormous credit for the leadership he exerted.
BARTIROMO: I totally agree with you and you deserve enormous leadership and Hank Paulson and Tim Geithner.
When I saw that picture in “The New York Times” this weekend, when they looked so sullen and upset. That picture said a million things and I just feel like, you know, thank you for leading us out of that.
We’re going to take a short break, the Dallas Fed is about to release your survey and we’re going to talk with you, once you release that, on the other side of this break. Richard fisher joining us when we come right back and Mario Gabelli as well. Stay with us.
(COMMERCIAL BREAK)
BARTIROMO: Hi, welcome back. We have breaking news from the Dallas Federal Reserve, the survey on business production right now. We bring back Dallas Fed President Richard Fisher to go through the survey, which is just breaking.
Richard, tell us a little about what you are releasing in this survey. Manufacturing up. But broad-based business activity down.
FISHER: Well, we also have a services index and a retail index. So it’s still positive, still moving in a direction. You have to remember this is a booming Federal Reserve district. But I’m glad you asked, Maria, because only 2.5 percent of our employment is oil and gas. There’s a stereotyped view of Texas and my Federal Reserve district.
It is largely service, business services, financial services driven and of course export driven as well as manufacturing driven. And it’s as diversified as the rest of the economy. And these three indicators, the manufacturing index, the services sector index and that subindex are retail sales, actually have the highest correlation with the national indicators of all the Federal Reserve Bank indices.
So continuing to expand but at a slightly slower pace. Continuing to see the same kind of wage expansion and employment expansion that we saw in January, which of course was unaffected by the severest weather that we saw in what I call the frozen states. But a little bit less optimism about the future. And again, I think this goes back and reflects the fact that businesses still remain concerned about fiscal policy.
But right now, things are moving in the right direction. And they’re still very positive. It’s just at a slightly slower rate than what we saw in the last couple of months ,but still very strong.
BARTIROMO: But there is also something going on in Dallas and in Texas overall, where you continue to see job creation. And I mean, the energy business is certainly part of it.
Mario was talking earlier about fracking and the potential in terms of investible ideas.
But give us your sense about the energy revolution in this country right now, Richard, and whether or not we’re ever going to tap into it. I know we’re tapping into it in Texas. But I mean, do we need to see that Keystone approved?
Do we need to see fracking pick up speed?
What’s your take?
FISHER: Well, first, we owe a lot to a man named George Mitchell, who unfortunately is no longer with us, but one of the great geniuses of all time out of Houston that made this revolution possible.
Despite government’s best efforts, so this is not just Texas, Maria, it goes all the way up to North Dakota, Pennsylvania and other places. This is very important.
In the case of my state, we now produce more oil than Norway or than Venezuela, than all 28 European countries. And we produce more gas than Canada now. This has just been accelerating.
So it just gives us, as Mario mentioned earlier on your show, much more independence. It’s a very positive thing. And new methodologies will be continuing to come forward to take away some of the risks of fracking. This is good for America.
And it changed a lot of the dynamism in terms of our foreign policy in the Middle East and elsewhere. Again that’s up for our diplomats to determine.
But it helps our economy move forward because it lowers the price of a vital ingredient for our economic engine.
BARTIROMO: Is there anything you see on the horizon that could be a red flag, that could upset this sort of steady improvement that we are seeing in the U.S. economy?
FISHER: There are always tail risks out there, Maria. You see, of course, some problems emerging in emerging countries. But you never know. I’m just saying that what we are hearing now, I am hearing with my ear to the ground, talking to business leaders around the country, not just in my district, there is a better attitude out there. But there is still a need. And the need is clear. And that is for the fiscal authorities to get their act together.
BARTIROMO: Yes. That’s — we’ll end it there.
Richard Fisher, great to have you on the program. We so appreciate your time today. Thanks very much for joining us.
FISHER: Thank you, Maria.
