Charles Evans, president and CEO, Federal Reserve Bank of Chicago
Chicago Fed chief thinks data is in his corner when it comes to changing policy
Speaking out didn't come easily at first, but Evans thinks data is in his corner when it comes to changing Fed policy to improve unemployment
In an election year, this sounds like political rhetoric. But Evans isn't running for office.
Federal Reserve Bank of Chicago, he's waging a campaign of his own, and it's radical — at least for a central banker, whose every public statement is parsed for clues about the economy. Federal Reserve Chairman Ben Bernanke has dismissed his ideas as reckless. Slate magazine called Evans ingenious and asked, "Can this man save the American economy?"
Evans' work is wonkish, and he says little to make it more accessible. He talks about the recession like a professor would, throwing out statistics and terms like "shadow banking sector" and "liquidity trap."
But Terry Mazany, CEO of the Chicago Community Trust and a director at the Chicago Fed, said Evans has clearly found his voice at the national level.
"Given my work on the ground dealing with homelessness and unemployment, to have a (Fed) president who feels very passionately about his responsibility to lead efforts to lower the unemployment rate means a lot," said Mazany, who heads one of the nation's largest community foundations. "It should mean a lot to the people of this metropolitan area."
Evans' big idea is this: He says the Federal Reserve, which establishes national monetary policy, should be doing more to goose the economy, which would help create jobs. Critics say that trying to stimulate more growth would only lead to more inflation and not have much effect on reducing the jobless rate. Evans counters that the central bank should tolerate higher inflation, as much as 3 percent, which is above the Fed target of 2 percent.
Higher inflation is worth the risk, Evans said, if more aggressive policies help bring unemployment down from its current 8.2 percent.
But the Fed, especially since the burst of inflation in the 1970s, has done whatever necessary to keep prices in check. So Evans' willingness to tolerate slightly higher inflation has been greeted as if he were suggesting that the Earth is flat.
The criticism doesn't seem to faze him. He's secure in his views because he is an expert in his field, not a banker. He has a doctorate in economics and has done years of research on how changes in monetary policy affect the national economy.
Even before the dismal May jobs report came out 10 days ago, with unemployment ticking up from 8.1 percent, Evans was gaining supporters. Eric Rosengren, president of the Boston Fed, said at the end of May that the Fed should act to boost the money supply
Economists expect a fierce debate about whether the Fed should take more action to stimulate growth when its policymaking body, the Federal Open Market Committee, meets June 19 and 20.
Evans is not a voting member of the committee this year. The peculiarities of the Federal Reserve system allow him a vote every other year.
But Evans has made his mark on the national debate and at the Chicago bank's imposing neoclassical headquarters, in the heart of the city's financial district at Jackson Boulevard and LaSalle Street.
"It gives the public confidence when you see the Fed isn't some monolithic, one-size-fits-all set of people who blindly agree like lemmings," said Anil Kashyap, a professor of economics and finance at the University of Chicago Booth School of Business and a consultant to the Chicago Fed. "It also serves the Fed well to have these voices making these arguments."
Nothing about Evans, 54, hints at the unconventional. He's a mild-mannered policy wonk who reads economic literature on the treadmill. Known as Charlie, he lives in Glen Ellyn with his wife and two children. He loves to play golf.
His willingness to step out on his policy views are rooted in his training and research, his faith in the Fed's mission and a belief that extraordinary times call for extraordinary measures.
The Federal Reserve is America's central banking system, managing the nation's currency, money supply and interest rates. It is composed of the presidentially appointed Board of Governors and 12 regional banks located in major cities. The Fed pulls strings in the economy by expanding or shrinking the money supply, partly through the control of interest rates that private banks charge each other. Its decisions do not have to be approved by the president or lawmakers, but it is subject to congressional oversight.