Opinion

Felix Salmon

Broke bureaucrat of the day, St Louis Fed edition

By Felix Salmon
February 1, 2012

Binyamin Appelbaum has helpfully aggregated all the Fed presidents’ financial disclosure statements in one place. The richest Fed president is Dallas’s Richard Fisher, who used to run an investment fund called Value Partners. And the legacy of Value Partners is still visible in Fisher’s statement: he owns more than $500,000 of stock in an obscure clothing company called Cherokee Inc, for instance, which was one of Value Partners’s biggest investments.

But the most striking disclosure comes at the other end of the scale, from St Louis Fed president James Bullard. Bullard’s a career central banker who has never had a lucrative private-sector career, but he’s still doing OK for himself: his annual salary is $281,300, which should be more than enough to bring up a family of four in St Louis.

Here’s the thing, though: Bullard’s disclosure form is completely blank. Which means that, except for his house and his Federal Reserve retirement benefits, he has no investments at all worth more than $1,000 — not even a savings account. Or, to put it another way, the president of the St Louis Fed, earning well over a quarter of a million dollars a year, is living paycheck-to-paycheck. Every two weeks, he gets paid $10,819, less taxes and deductions, and yet by the end of the year he still doesn’t have even $1,000 in a checking account.

Now there might be a good reason why Bullard was completely cleaned out for some reason and left with absolutely nothing but the roof over his head. Maybe there was a lawsuit, or medical bills, or something like that. But still, Bullard’s balance sheet is quite astonishingly bare, for someone in his exalted position.

Which makes a cynical old journalist like me start wondering about the revolving door. It actually makes perfect sense to live beyond your means when you’re in the public sector, if you know that you’re going to make a lot of money in the private sector later on. It’s called consumption smoothing, and it’s entirely rational. You might not be able to lavish money on your family from a cashflow perspective, but that’s fine, because you’re still a wealthy man if you take into account the present value of massive future earnings.

So James Bullard, regulator of financial institutions in the mid-west and across the country, has an incentive to be very nice to those institutions, since they’re capable of rewarding him with lucrative work if and when he leaves the Fed. Work which he’s likely to want, if he continues as broke as he is right now.

Bullard, at just 51 years old, has a pretty long and lucrative private-sector career ahead of him, should he be so inclined. And when he filed that financial disclosure form, I wonder if he was thinking about the day when he would be able to fill it out with more than nothing.

Update: The instructions do say that Fed presidents should “exclude any personal account”; I’m unclear on what that means. Certainly other Fed presidents include checking accounts in their disclosures; Richard Fisher’s contain more than $500,000 in aggregate, on top of various money-market funds and the like, one of which contains more than $1 million.

Comments
19 comments so far | RSS Comments RSS

Felix – I’d love to hear about what happens if you inquire as to the accuracy of Bullard’s disclosure forms with the Fed… Seems unlikely that he is without a penny to his name, no?

Posted by KidDynamite | Report as abusive
 

It’s hard to say without the full instructions for completing the form, but I think it’s quite likely that he was able to exclude certain kinds of assets from reporting. For example, assets held in the Federal Reserve’s Thrift Plan probably were not required.

I wouldn’t be shocked if — notwithstanding the fact that other Presidents included such assets — broad index funds are excluded from reporting. The purpose of the form isn’t to identify net worth, it’s to identify conflicts of interest.

It’s worth noting that he also reports no liabilities.

Posted by ChiefX123 | Report as abusive
 

The instructions to the form instruct the respondent not to disclose personal accounts, meaning deposit accounts. (I found the instructions reproduced on p. 338.) So it’s baseless to say that he doesn’t have any money in checking or savings.

It seems like one should do at least a little investigation of wildly implausible inferences like that this wealthy man has a three-digit cash balance before going on to speculatively slander his character and his fitness for his job.

Posted by bobman5352 | Report as abusive
 

What ChiefX123 and bobman5352 said. This post reminds of of Greg Mankiw assailing associate Supreme Court justice Sotomayor for fiscal imprudence because, when she was nominated, she reported no savings for retirement and held no stocks.

What Mankiw failed to take into account was that as a career judge, she had a significant pension, the present value of which wasn’t required to be disclosed (which, if you think about it, can’t be, since it was a defined benefit plan).

I think the same dynamic will probably be true for Fed governors.

Posted by Strych09 | Report as abusive
 

this is a complete non-story. what business is it of yours how a public official spends his money? as long as he isn’t breaking the law, i don’t see the public interest or reason faux outrage (other than to attempt to generate controversy). man spends his pay check? the impertinence!

Posted by Worsel | Report as abusive
 

Further to your update — the Thrift Plan also could easily hold assets well over $1 million. The Federal Reserve also provides a pension.

If he makes it to retirement age at the Fed, he should be able to retire reasonably comfortably.

Posted by ChiefX123 | Report as abusive
 

“Personal account” is defined at p. 335 as checking, savings, CDs, and money market funds. The premise of this post is false and it should be retracted.

Posted by RogerNegotiator | Report as abusive
 

So obviously, the lesson is, the longer someone works for a relatively lower salary for the government, the more likely it is that he is motivated by the basest and greediest motives that relate to his future service in the private sector. So actually, the true height of altruism is to start young and early striving for money — in that way you will prove your devotion to the common good.

Seriously, Felix, this was way beneath you.

Posted by rb6 | Report as abusive
 

Don’t forget the FRB thrift plan for employees especially as you say Bullard is a career central banker:

“Employer Matching Contributions

If you have fewer than five years of service, your employer matches 80 percent of the first 6 percent of salary that you contribute to the Plan. The maximum amount of this matching contribution is 4.8 percent of your salary. Employer matching increases to $1 for every $1 you contribute, up to 6 percent of salary, if you have five or more years of service.

This means that for every $1.00 you save (up to 6 percent of your pay), your Employer adds $.80 (up to 4.8 percent of your pay).”
http://www.federalreserve.gov/careers/ne w4hire/documents/3_benefits/3_3_0_4_0.ht m

Posted by JohnBChilton | Report as abusive
 

Not sure what applies to the Fed as opposed to the financial disclosure reports that, as part of my job, I review for government officials, but the fact that some of his peers disclose the cash and similar accounts doesn’t necessarily mean he doesn’t have such accounts. It very well may mean that his peers overdisclosed.

Posted by DCGovEsq | Report as abusive
 

If he is nearing 30 years of Federal Service he probably has between $500K to $1M in TSP, assuming he contributed the IRS max every year. He’s probably closer to $600K, unless he timed the ups and downs of the C fund perfectly. He probably has his outside holdings in FDIC CDs, which tells you something also. Also, if his wife does not work, and he has kids in private school in the DC area, $300K/year isn’t enough to accumulate a fortune beyond his TSP. Maybe another $1M. My guess for his net worth is about $3M – $5M.

Posted by maynardGkeynes | Report as abusive
 

I’m unclear how you could write the sentence “I’m unclear on what that means” [re: the definition of deposit accounts within the scope of the disclosure form] and still keep this opinion piece up under the circumstances. Here’s hoping you get around to figuring out what it means before a few more people potentially get the wrong idea about this.

Posted by jcsnotes | Report as abusive
 

Felix I generally love your stuff but you may be way off on this story. Federal disclosure does not even require listing of mutual funds that hold diverse portfolios. Therefore no meaningful assessment can be made about Mr. Bullard’s assets or net worth. He may be due to his position abstaining from holding individual stocks, sector funds, and other particular securities to avoid conflict of interest. And as others have stated above, his TSP and pension would not have to be disclosed. He probably deserves our respect rather than be the target of insinuation. I would guess he is a dedicated civil servant. I think apologies are owed.

Posted by MrChutney | Report as abusive
 

MrChutney, as I posted above I believe Felix is way off, but I think you are probably incorrect about mutual funds. Although most federal employees do not have to disclose diversified mutual funds, it looks like the Fed does require disclosure. It’s hard to tell from Bullard’s form because it looks like he is using an older version of the form than the other filers used. But if you look at p 336 the instructions refer to excepted investment funds, which are defined on p 335 as diversified mutual funds. On most of the forms gathered by the Times, there is a column on Schedule A for identifying excepted investment funds. So disclosure of all mutual funds seems to be a Fed requirement. I agree with everything else you said.

Posted by RogerNegotiator | Report as abusive
 

Yet again…
You are a blogger – you are entitled of course to post off the cuff opinions. But at this point, it’s clear to all that you were fundamentally wrong – and I’m willing to bet – please challenge me here! – that you realize this about some really basic premises of your post.
So now, if we read it, there is an incrediby vague “I might not have understood everything” footnote at the end if one reads thus far. What’s up? Do you really feel that there is some religious obligation not to alter one’s words once submitted, no matter how false they may be? This make little sense to me, but even if so why can
t you put your corrections at the front rather than in a footnote. Is this a traffic optimization thing?

Posted by bxg9 | Report as abusive
 

I admire Felix’s attidude, but it seems he overlooked Bullard’s hidden assets.

http://www.cnhedge.com

Posted by cnhedge | Report as abusive
 

Maybe he doesn’t trust banks and has it all squirrelled away in mayonaise jars buried in his back yard ..

Posted by Woltmann | Report as abusive
 

Fischer seems to have an even stranger approach to money demand than to money supply. If my eyes don’t deceive me and I understand correctly he has $500,000 in checking accounts ? Why ? Is he preparing for a possible impulse purchase of an Island somewhere ?

It seems to me to be crazy to hold so much wealth in an account which pays near zero interest (my US checking account pays exactly zero, but I guess if you have a balance of hundreds of thousands you don’t focus on avoiding fees).

Fisher has a strong personal interest in low inflation since so much of his wealth is, for some incomprehensible reason, not in TIPS. This creates conflict of interests. I strongly suspect that he feels that he should, perhaps that he must, make sure that inflation is costly to him personally. I suspect that he would consider shielding himself from inflation to be immoral. That is, he feels morally obliged to have a personal interest at stake when making policy decisions. I guess this because I guess he considers inflation to be absolute evil (the way the Pope views birth control pills) so he considers having a personal interest in low inflation virtuous.

Posted by robertwaldmann | Report as abusive
 

Fischer seems to have an even stranger approach to money demand than to money supply. If my eyes don’t deceive me and I understand correctly he has $500,000 in checking accounts ? Why ? Is he preparing for a possible impulse purchase of an Island somewhere ?

It seems to me to be crazy to hold so much wealth in an account which pays near zero interest (my US checking account pays exactly zero, but I guess if you have a balance of hundreds of thousands you don’t focus on avoiding fees).

Fisher has a strong personal interest in low inflation since so much of his wealth is, for some incomprehensible reason, not in TIPS. This creates conflict of interests. I strongly suspect that he feels that he should, perhaps that he must, make sure that inflation is costly to him personally. I suspect that he would consider shielding himself from inflation to be immoral. That is, he feels morally obliged to have a personal interest at stake when making policy decisions. I guess this because I guess he considers inflation to be absolute evil (the way the Pope views birth control pills) so he considers having a personal interest in low inflation virtuous.

Posted by robertwaldmann | Report as abusive
 

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