Richard Fisher: Don Quixote in a Business Suit

The president of the Dallas Fed keeps tilting against the ‘rot that’s destroying our fiscal house.’

If you had to create a person to be president of the Federal Reserve Bank of Dallas, someone with the swagger and bravado to match Big D’s business elite, it might just be Richard Fisher.

The 65-year-old former investment banker, starting his 10th year leading the Dallas Fed, embodies many of the traits often associated with the city’s top names.

He’s brash and outspoken, eager to stake out his own ground like Boone Pickens and Ross Perot. He’s whip-smart and clever, a quick wit who enjoys people and uses humor to effect, like Herb Kelleher. And he’s fiercely independent, not shy to criticize Washington or brag about his home state.

For more than three years, Fisher has made a name for himself for his strong dissents from the central bank’s loose monetary policy known as quantitative easing (or QE), which flooded the markets with trillions of dollars to stimulate a weak economy.

In speeches, he uses cultural references from Queen Elizabeth to Errol Flynn to Mick Jagger to make his point that the Fed’s easy money ways have put “beer goggles” on the eyes of investors and protected Congress from the consequences of  “fiscal malfeasance.” 

Still, the economy has gradually strengthened, inflation has remained tame, and now the Fed is reversing course. In recent months, the bank’s Open Market Committee voted unanimously to reduce monthly bond and asset purchases, from $85 billion to $75 billion and then to $65 billion, with more cuts expected.

So has Fisher been right? He admits to being “an outlier,” though he says he’s feeling less lonely at Fed meetings now. “The question I had was: Did we really need to do this much? I don’t believe we did,” Fisher told me recently. 

He remains unconvinced that the Fed has gotten its money’s worth for its unprecedented actions. The recovery has been tepid and job creation disappointing. He believes that businesses are holding back because of problems in Washington, from Obamacare to the federal budget and taxes.

“The efficacy of the policy remains questionable,” Fisher says. “Our gas tank, we have filled it. We have all the cheap, high-octane fuel we need to manage the economy. The question is: What incents people to step on the accelerator and use it?”

You can probably tell that Richard Fisher comes from the private sector, not academia. He started his career at Brown Brothers Harriman in New York, which brought him to Dallas after a stint in Washington, D.C., with the Carter administration. He launched and ran his own investment firm before returning to government service as a trade representative and ambassador. After two unsuccessful runs for the U.S. Senate (as a Democrat), Fisher was elected to the Fed post.

Ralph W. Babb Jr., chairman and chief executive of Dallas-based Comerica Inc., the biggest bank based in Texas, is a Fisher fan. “I very much agree with him,” Babb says. “We’re very fortunate to have Richard as our president at the Dallas Fed.” 

Babb’s bank has major operations in Texas, Michigan, and California, so he has a good perspective on the nation’s business conditions. Although the economy has improved, Comerica’s customers are being “very cautious” and remain reluctant to make longer-term investments. 

So Fisher persists, sort of like Don Quixote in a business suit.

A January talk he gave to a gathering of corporate directors in Dallas was titled, “Beer Goggles, Monetary Camels, the Eye of the Needle, and the First Law of Holes.”

While the Fed’s rush of cheap money has driven the stock market to new highs, investors are a little like a drunk in a bar, Fisher says. Everything looks better “under the influence of free-flowing liquidity.” 

The “monetary camel” refers to unwinding the Fed’s historically large balance sheet, which will be like passing a camel through the eye of a needle.

“The first law of holes” is aimed at his favorite target: Congress. “If you find yourself in a hole,” Fisher says, “stop digging.”

But Congress just won’t stop digging, he told a crowd in New York last fall shortly after the government shutdown. “No clever new monetary innovation by the Federal Reserve can offset the rot that is destroying our fiscal house and the blight it spreads over the economy.”

Fisher closed a recent speech by showing a group of business leaders a picture of the Capitol dome. “It’s a beautiful building,” he said, “totally nonproductive, counterproductive, and it is the brake when we’ve been filling the gas tank.”

No matter what you think of QE, that one is hard to argue with.