Retiring Fed official retained local connection

Jan. 20—Esther George learned all the nuances of monetary policy while studying business and then working her way up the ranks at the Federal Reserve Bank of Kansas City.

Her experience growing up on a farm near Faucett, Missouri, taught George another equally valuable lesson. For a central banker, decisions made on the macro level are more than lines on a chart. They affect the prospects of real people.

"You begin to understand the interconnections between those larger policy decisions and what they meant on the ground," she said. "That was true for my own family farm. I watched my family have to deal with those record-high interest rates while running a farming operation. It gave you a first-hand sense of how important these issues really are."

George is retiring this month as president of the Federal Reserve Bank of Kansas City, wrapping up a career that took her a long way from the family farm and the classrooms of Missouri Western State University, where she graduated with a business degree. She started as a bank examiner and eventually became president and CEO of the Federal Reserve Bank of Kansas City. It's one of 12 regional entities that make up the nation's central bank.

During her tenure, George found herself weighing in on profound issues affecting the nation's economy, including an unprecedented expansion of the money supply and, more recently, a sharp increase in interest rates. She served as Fed bank president for 11 years.

She never forgot her local roots, speaking often at Missouri Western State University and St. Joseph Chamber of Commerce events. She rubbed shoulders with the elites of finance, but friends say she still expressed a fondness for the Fredrick Inn Steakhouse in St. Joseph.

"She was always sensitive to what the regional economy was experiencing," said Corky Marquart, who retired as market president of Commerce Bank in St. Joseph. "That was what drove her decisions. I hope the community understands what a privilege it is to have one of our daughters do as well as she's done."

George trained Marquart as a bank examiner when both worked for the Federal Reserve in the 1980s. Marquart believes George's experience during the banking crisis at that time proved instrumental when she rose to become regional president and gained a seat on the Federal Open Market Committee. The FOMC is a powerful panel of central bankers and regional presidents who set interest rates on overnight bank loans.

"Having come up through the trenches, she saw first-hand the challenges that banks were facing," Marquart said. "Those were hard years for banks. St. Joseph had two, maybe three banks go under at that time."

George emerged as a contrarian voice within the Fed, at times expressing concern about the economy overheating when the consensus was toward low rates and easy money. At one point in 2016, she was the lone vote on the Open Market Committee in favor of raising interest rates. In December of 2022, as inflation awoke from a 40-year slumber, she was among 12 members who voted to increase a benchmark rate to a range of 4.25% to 4.5%. It was the seventh rate hike that year.

There was no "I told you so" moment. Unlike political disagreements, George said differences of opinion remain respectful among policymakers on economic matters.

"I think it's your obligation, when you have a different view, to express that," George said. "I hope that accrues more trust to this institution and the public can see these decisions do get settled with a variety of views at the table. That was always my goal, to be honest about the views and to be honest about how I saw those issues."

The Fed has plenty of decisions on its plate in 2023. Policymakers will seek ways to shrink the Fed's balance sheet, which mushroomed under a quantitative easing strategy that boosted economic activity but raised concerns about asset bubbles and inflation.

"I think it remains to be seen how that unwind is going to occur," George said. "You want the Federal Reserve to have the smallest influence on the economy."

But the biggest immediate decision at the upcoming Jan. 31 FOMC meeting will be what to do about interest rates. George sees that her career at the Fed came full circle on inflation. She joined the Federal Reserve in 1982, just two years off a 13.5% increase in consumer prices. The rate of inflation was 8.6% last year.

It's why she would advocate for a continued hard line against inflation so that spiraling prices don't become a permanent fact of life.

"I've bookended my career with having to wrestle with inflation," she said. "One of the things that caught us off guard in the '70s and '80s was inflation becoming ingrained in people's thinking. The Federal Reserve allowed it to go on. It allowed the public and businesses to begin to build into their future assumptions that inflation would continue to be high. That hasn't happened yet."

Greg Kozol can be reached at greg.kozol@newspressnow.com. Follow him on Twitter: @NPNowKozol.