The Economy: Current State and Outlook
Roger W. Ferguson, Jr., explores the roots of the current recession on BUniverse
Roger W. Ferguson, Jr., president and chief executive officer of the private retirement-investment company TIAA-CREF, explores the roots of the current recession, some early signs of economic recovery, and the lessons both companies and individuals saving for retirement can learn from the financial turmoil of the past few years. Ultimately, he says, we should all learn to make financial decisions more cautiously.
Ferguson begins by analyzing the current state of the American economy. He does not yet see an end to the housing market fallout or rising unemployment; but perhaps the biggest problem, he says, is a drop in consumer confidence. Our trepidation is justified, he argues: overall personal wealth declined by $11 trillion in the past year, and the amount of consumer debt is now higher than the national income. But, he says, there are “early and tentative” signs that the markets are starting to turn: business leaders’ confidence is rising, equity markets are “trying to rally,” and the Federal Reserve’s policies seem to be working.
So what can we learn from the recession? Financial companies, Ferguson says, should take longer-term views of growth and strive to create healthy risk-management cultures. The past decade witnessed “a failing of corporate governance at a number of levels,” he says; creating strong boards of directors and risk-assessment teams will help restore the “extremely fragile” but important trust that shareholders and the government have lost in the financial system. To workers worried about their retirement savings, he advises not to act too quickly or try to outsmart the market: “Though your plans may have changed, your plan should not change.” Ferguson concludes by looking at higher education’s place in America’s financial recovery, noting that by creating human capital, universities “will play a very important role in helping the economy right itself.”
April 22, 2009, 11:30 a.m., 595 Commonwealth Avenue
About the Speaker:
Roger W. Ferguson, Jr., is the president and chief executive officer of TIAA-CREF, the country’s largest private retirement system. In February, President Obama appointed Ferguson to his fifteen-person Economic Recovery Advisory Board. Prior to joining TIAA-CREF in 2008, Ferguson was chairman of the American division of the insurance company Swiss Re and vice chairman of the Governors of the U.S. Federal Reserve, from which he resigned in 2006. He has practiced law at Davis Polk & Wardwell and McKinsey & Company, where he was a partner. He received his undergraduate degree, a law degree, and a doctorate in economics from Harvard University and was a Frank Knox Fellow at Cambridge University. He serves on the Board of Overseers at Harvard University and on the Board of Directors of the Harvard Alumni Association and is a trustee of the Institute for Advanced Study at Princeton University. He also is a member of the Council of Foreign Relations and the Group of Thirty, an international advisory body of leading financiers and academics.