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Interview with James Bullard Conducted by Karen Branding, David Wheelock July 26, 2023 Branding: Today is Wednesday, July 26, 2023. And we're with President Jim Bullard, who on July 13th announced his upcoming departure from the Federal Reserve Bank of St. Louis to become inaugural dean of the Mitchell E. Daniels, Jr. School of Business at Purdue University on August 15th, 2023. Mean�me, President Bullard sat down with us today to have a discussion about his experiences as President of the St Louis Fed for the past 15 years and his overall 33-year tenure at the bank. Let's start with introduc�ons. My name is Karen Branding. I'm the Senior Vice President of External Engagement and Corporate Communica�ons and the Bank's corporate secretary. Dave. [00:00:44] Wheelock: I'm David Wheelock. I'm an economist and Senior Vice President and senior policy adviser in the office of the President of the Federal Reserve Bank of St Louis. [00:00:53] Branding: Jim. [00:00:54] Bullard: I'm Jim Bullard. Up un�l recently, I was president and CEO of the Federal Reserve Bank of St Louis. Now I'm depar�ng. [00:01:03] Branding: Well, let's get started. Okay. By way of background, Jim, tell us about how you came to join the St Louis Fed, your posi�on at that �me and how your role has evolved over your 33-year career at the Bank? [00:01:18] Page 1 of 20 Bullard: Uh, I came to the Bank from Indiana University, where I got my Ph.D. There's an annual job market for PhDs. I had many interviews at that job market, over 30, as I recall, some of them elsewhere in the Federal Reserve. But the St Louis Fed made me the best offer, and so I came and joined the staff here as a staff economist. So, it was a good place to work at that �me, and s�ll is, but it had a good combina�on of plenty of �me to do research but also a policy angle to it. So that appealed to me as a budding Ph.D. researcher. [00:02:09] Branding: Mm hmm. Well, now, let's fast forward a bit. When you became president in early 2008, the Federal Reserve was just beginning to grapple with the financial crisis. The Federal Reserve responded with a variety of new programs, as well as a vigorous monetary policy response that set the stage for a long recovery. Can you tell us about your experience as a member of the Federal Open Market Commitee, the FOMC, at the �me, and what the Fed learned from that episode? [00:02:38] Bullard: Yeah, I became president of the Bank in April 2008, and I would refer listeners to this to a slide deck that I have called the Notorious Summer of 2008, because it was a key moment in U.S. macroeconomic history. But I'll give you just a gist of what was going on at that �me as I joined. I think one thing to keep in mind is that I'd been on the research staff for 18 years before I became President, and I was also FOMC Class I, which is sort of the top level as far as monetary policy is concerned. And so, I was I had access to the key monetary policy documents and discussion all the way through the 1990s and up un�l 2000–and up un�l the present, really. So, when I came in in 2008 as President, the crisis had already been going on for some �me. The crisis really started in August, in earnest, in August of 2007, and to be specific, August 9th and 10th of 2007. That's the point where the Fed really went into emergency mode as far as the global financial crisis was concerned. That's the those are the days where the major banks of the world started to distrust each other. And that is the hallmark of that par�cular crisis. So, the Fed had taken ac�ons in the fall of 2007, and especially in the winter of 2007/2008, when interest rates were lowered drama�cally. And by the �me you got to the spring of 2008, you know, you were already nine months or so, eight months into the crisis, there was a Bear Stearns event right around that �me. And I was named president shortly a�er that. I actually had a call with then Chair Ben Bernanke at the �me. So, the way this works is it's all very quiet when, you know, Page 2 of 20 you're going through the search process and, you know, it's announced at 10:00 and then at 10:30, the chair gives you a call. And I knew Ben Bernanke from the academic world and from �mes that we had dinner together and done other things. And so, I was expec�ng him to say that, “Hey, welcome to the Fed, glad you're joining the team,” you know. But instead, he told me all about the Bear Stearns deal and the mezzanine notes and the special arrangements that have been made. So, I think I've always told that story because I think it reflects the intensity of the �mes and the intensity of the crisis that, you know, Bear Stearns was such a major play. [00:06:00] Now, basically, the Fed intervened in that one. And I've since been saying that the problem with the global financial crisis was that the Bear Stearns interven�on was prety successful. And it gave a sense of complacency that that could be repeated if one of the other investment banks had significant problems. That turned out to be an inaccurate view. But that was the view that was held during the notorious summer of 2008, that if Lehman was going to have trouble, that you'd be able to play the same trick again. You'd be able to get a marriage partner for Lehman, and then you'd be able to escape serious problems because that's what happened in the Bear Stearns case. Also, I think in the summer of 2008, it was possible to argue that the U.S. was not in recession. The real �me data said that the U.S. economy was not in recession at that �me. There was not nega�ve GDP growth. And it was also possible to say that because the crisis had been going on for a year and we had taken lots of ac�on, that it was possible that we'd skate through and avoid recession. That was a typical thing that was being said in early August of 2008, which was one year anniversary of the crisis itself. That all came unraveled. I think the reason that became unraveled was because in the mean�me, during that year, oil prices had doubled all the way up to $145 a barrel. And that slowed down the economy in other ways. And then that slowdown made the financial crisis much, much worse. You got the failures of Fannie Mae and Freddie Mac, and then later Lehman did have further difficul�es and collapsed. And then you found out about AIG on top of that. And so, then the risk of recession was really on at that point. But I think that the ini�al thinking right around that �me was that in the summer and in, let's say, early August 2008, was the idea that the Fed had taken lots of ac�on, that the crisis had been going on for a year, firms had had �me to adjust, and if something further did happen, you could play the Bear Stearns card again. And most of that came unraveled in the fall—all of that came unraveled in the fall of 2008. So, then the crisis was really on and the recession is usually dated to December Page 3 of 20 2007. But if you look at it, it was far more serious when you got to the third quarter and fourth quarter of 2008 and beyond that. So, it was a difficult �me, obviously, for the FOMC and a fascina�ng �me to get bap�zed as incoming president. [00:09:09] Branding: Well, just a follow up ques�on to that. Do you think that that experience in the Fed's response to it, did it help the Fed in some ways prepare for what it had to go through with COVID and the pandemic? [00:09:22] Bullard: COVID is a different shock. It was, you know, I think one thing to stress is that the global financial crisis originated on Wall Street and reverberated around the world, whereas COVID was nature driving health problems all across the world. And so, it was a very different and more out—it's a shock origina�ng outside the financial system, I suppose, at the heart of the financial system. So, in some ways it's the polar opposite of what happened during the Global Financial Crisis. However, we did pull out many of the same ideas from the Global Financial Crisis response playbook to respond to the pandemic. And I think one of the best things that happened was that those ac�ons forestalled a financial crisis that could have occurred in March and April of 2020, but did not occur. The measures of financial stress during March and April of 2020 rivaled those of 2008. So, as far as the amount of stress in the financial system, is almost as bad or just as bad in March and April of 2020 as it was in 2008. But, because of all these rapid ac�ons that were taken jointly with the U.S. Treasury, we were able to forestall a financial crisis that could have occurred on top of the pandemic. And that was one of the great success stories about the pandemic. One of the things that we did locally here during the pandemic era is we provided lots and lots of analysis right around in March and April of 2020, some of the best analysis I think that existed at that �me about the effects of the pandemic on the economy. We had an analysis that was the predic�on about what would happen in sort of the May-June �meframe. So, you had March and April of 2020, and you basically had people predic�ng that the Great Depression was upon us. But what actually happened was that May and June were quite strong and one of the manifesta�ons of that was that the May—let's see, April, March, April, May, yeah—the May jobs report was going to come out in June, the first week of June of 2020. Page 4 of 20 And Wall Street thought that it would be -10 million. So, ridiculously large job loss that they were predic�ng. We had an analysis here that said it would be plus a couple of million. So, we actually didn't know what to make of it when I first saw that. But as it turned out, that was accurate. So, Wall Street was totally wrong. So, this is a miss of like, you know, epic propor�ons, biblical propor�ons. As far as a miss on that par�cular jobs report. We got that. Our analysis here got that exactly right. And so that was a big success story. I remember si�ng—of course, you couldn't talk to anybody, you're all remote during the pandemic—but I remember si�ng on my porch and reading that, and then I sent email to all the researchers in the whole Federal Reserve System and said, “Hey, maybe you beter pick up this analysis and take a look at it.” So, that was—I would say I just put that anecdote in there as an illustra�on that, you know, we do a lot of very serious basic research that's headed for journals and stuff, but we also turn around and do great and �mely research about current policy issues. [00:13:35] Branding: Thanks, Jim. One other thing before I turn it over to Dave is, you know, throughout your �me as President, you made transparency and public outreach priori�es for your communica�on strategy interna�onally, domes�cally and across our seven state Federal Reserve district. So, talk more about the importance that you put on communica�ons and the role it plays for the monetary policymaker. [00:13:58] Bullard: Yeah, we've done a lot of outreach. We've had a very careful, carefully designed outreach strategy, especially for the district, but also na�onally and interna�onally. You know, former Chair Bernanke once quipped that monetary policy is 98% talk and 2% ac�on, and he's very right about that. That sounds crazy if you're not involved in it. But that comes from the idea that most of what's going on is a shaping of expecta�ons about future policy. And it's those expecta�ons about future policy that feed back to actual decision making today by businesses and households. So, in some ways, a lot of monetary policy is actually this guidance about how are we going to play this going forward. Of course, you have uncertain�es abound and all kinds of things are happening in the macroeconomy at any point in �me. So, this requires a con�nuous nurturing and a con�nuous process to keep the expecta�ons consistent with what's happening in the economy. Page 5 of 20 So, I think it's been a great development, and I credit former Chair Bernanke in unleashing the transparency revolu�on for the Federal Reserve and changing the a�tude from the Volcker-Greenspan Era. And Greenspan did do some things in the in the realm of transparency, but Bernanke did a lot more. And you’ve set up now a system where FOMC and other central bank policymaking commitees are very ac�ve in constantly communica�ng their current posi�on and their expected future posi�on as part of the normal course of how to conduct monetary policy. I also think the FOMC, being the most powerful commitee in global finance and being a member of that commitee, it's incumbent that you talk to people both on Main Street in your local jurisdic�on, also to people na�onally, understand na�onal trends and businesses, some of which might not be in your par�cular district or your par�cular area, but also interna�onally. The Fed is very important all across the globe, and I think it's important to, at least at �mes, be in other loca�ons around the world so that you can get a sense of what's going on in Asia, what's going on in Europe, and even other parts of the world that are up and coming, such as the Middle East, La�n America, Africa and elsewhere. So, you know, it's when you're outside the country, you just can't realize how important the FOMC is for everybody all around the world. [00:17:05] Branding: You know, just to follow up on that, you know, I would say that you were out front on the transparency revolu�on in the Fed. You know, the nature of your communica�ons in 2008 was probably a bit untradi�onal or nontradi�onal for Fed policymakers back then. For example, you know, you talk to media frequently and in giving public presenta�ons on your policy views, you moved away from the Fed's typical approach of a prepared long speech in favor of PowerPoint presenta�ons. So, explain how that approach helped facilitate your broader strategy in terms of transparency in communica�ons. [00:17:43] Bullard: Well, I think in an interview or a fireside chat, you can talk more conversa�onally with people. And if you have enough confidence in in your posi�ons and in your views, then I think you can get them across in those kinds of se�ngs, in those kinds of formats. I liked using the PowerPoint presenta�on partly because a picture is worth a thousand words. I think that's one aspect of it. But also, you can summarize the presenta�on in a few bullet points at the beginning and the end, and those are o�en the things that will get picked up in the media as the summary statement. But you've designed the summary statements, so that you get the thing picked up in the right way. If you write a Page 6 of 20 long speech, it's harder to predict. It's harder for reporters, I think, to know what exactly you want to say here, because you're summarizing so much informa�on in a verbose way. So, I think also a part of our brand is to provide background and detail and data. And, you know, by using other formats, more lengthier formats, we did Wharton Radio and other things, you know, hour-long format. So, these are places where you can talk in more detail about maybe tangen�al issues or more minor issues with respect to monetary policy, instead of just talking about the absolute headline, you know, what's infla�on today or what's the interest rate going to do today. So, you know, macroeconomics is a complicated subject; you're talking about tens of trillions of dollars globally every single day. Many hundreds of trillions probably in assets being traded every day. So, you can't summarize all that in just, you know, a few words. So, you have to have some more expansive formats in order to be able to talk about things in more detail. [00:19:54] Wheelock: So, Jim, let me pursue this this line about communica�on. So, you are recognized as a par�cularly influen�al member of the FOMC. So, in your experience, what’s the best way to influence the FOMC? Is it primarily through speeches and interviews or more through your statements at the actual FOMC mee�ngs? [00:20:15] Bullard: Yeah, I think I guess I have a two-prong answer to this. One part is to recognize and admit that U.S. monetary policy is being debated 365 days a year, 24 hours a day through global media. And most of the par�cipants in this debate are actually not the people on the commitee, but the people in financial markets. They have posi�ons that they're arguing for, and they have books of business that they're arguing for. So, I love them and a lot of them are former Fed people. But on the other hand, they're not the actual policy makers and they should not by themselves be shaping actual monetary policy decisions. So, I think, in order to have a successful policy, you have to have ways to talk from the policymakers’ perspec�ve about the monetary policy debate and what the policy is trying to accomplish, not necessarily what the private sector would like to accomplish. And so, this sets up a 24-hour-a-day, a global debate going on, which I love, I love the debate. And this is, this is how it works. But I think you should just admit that from the beginning that that's what's going on and that's how it works. Page 7 of 20 So, you have to par�cipate in that. I think it's great to have a big commitee because you can have many people have various events at various �mes. A lot of those events are scheduled way ahead of �me. But on a given day they can say, “Well, I thought the jobs report was, you know, it was a litle weaker than I expected” or “I thought—I've changed my view slightly. And now I think, you know, rate should go up a litle bit more.” That's part of the daily kind of adjustment in monetary policy. And I think it's great to have a big commitee. It's too much for the chair. The chair has, does a great job but has certain junctures where the chair can do the communica�on on behalf of the en�re commitee. But individual members can give their own views in various formats and various places as you go through the year. The other part of this is that the mee�ng itself—which is a great thing, a great checkpoint—but the mee�ng is just one day out of these 365 days. And so, and it's a big formal mee�ng. And so, you can't really expect the chair to allow, you know, a kind of wild conversa�on. And we're not sure how the mee�ng is going to come out. It all has to be prety much set by the �me you get to the mee�ng. It’s too big a group and too heavy of consequences to have that not be lined up ahead of �me. So, that means that when you actually get to the mee�ng, what you're going to do on that par�cular day is usually prety clear and most of the debates about, I think, is about the future moves in policy, not at that par�cular mee�ng, but in the subsequent mee�ngs to that. So, it is a good checkpoint. It is a good place to hear everyone's views and it's good for everyone to sort of look at the same data on the same day and make sure they're all on the same—that they understand everyone else's posi�ons at that point in �me, and especially the chair's posi�on. But I don't think you can really have expecta�ons that you're going to come into the mee�ng thinking it's going to go one way and then it's going to go quite a different way. [00:23:53] The commitee does get into trouble some�mes when there's a lot of financial market vola�lity, right as you're trying to go into the mee�ng. That some�mes upsets the plans for the mee�ng and can lead to a bit of chaos. I can think of two instances in par�cular that I some�mes cite. One is August 2011 where—you can check the transcript—Chair Bernanke came in at the beginning of the mee�ng, said, “We're going to have to do something different than what I previously thought.” People were taken by surprise. It was a hot debate. He got three dissents on the day, and it was unclear whether that was really a good policy choice or not. We spent a long �me unraveling that par�cular policy choice over the next 18 months. Another one was the June 2013 ‘taper tantrum’ mee�ng; I think that one also was a bit chao�c. The transcript is out about that. Again, you had unclear direc�on coming from financial markets and or even the chair as you came into that mee�ng and kind of split Page 8 of 20 commitee and didn't go well. Over the summer real interest rates went up by 100 basis points and it caused tremendous disloca�on around the world. I dissented on that one. I thought it was a good dissent on the day, that we should have had a sharper policy there. We were downgrading our outlook for the economy and for infla�on, but we nevertheless said that we were going to have a more hawkish policy, basically on that day. So, I didn't think it was a good one, and I dissented on that one. So, there are cases where the commitee does make adjustments more on the fly, but it's not basically it's probably not best prac�ce. Some�mes you get you get forced into it. We also had just one other dimension is the Sunday March 15th mee�ng in 2020. You know, the commitee was already planning to meet two days later, but because of the pandemic, you know, things were moving so quickly that, no, we had to move it up to an all-day mee�ng on Sunday and try to announce before close of business, before Asian markets opened on Sunday, that the commitee had lowered the policy rate all the way to, 100 basis points on the day, all the way to zero. And so, the commitee did agree with that. But it does show that you can move quickly if necessary. And the commitee is willing, and Jay was willing to respond to developments in a �mely manner. And that one was probably the fastest moving of all. [00:26:42] Wheelock: I've got a couple more ques�ons about the actual mee�ng itself and how you approach the mee�ng. So, I o�en remember hearing you say that the purpose of your remarks at an FOMC mee�ng is not so much about today's policy, but about se�ng up future policy or influencing the debate about the future mee�ngs. Is that a fair characteriza�on, and what were you trying to accomplish with your statements at FOMC mee�ngs? [00:27:07] Bullard: Yeah, I think last I was just saying the mee�ng itself, it's very formal. It's not at �mes it's been a litle bit more open and other �mes a litle bit more sedate, I would say. But it is a moment where you get to hear everyone's statements and posi�ons, kind of see where everybody's at. If you're following this all the �me, you can detect subtle�es and changes in people's posi�ons and how they interpret various pieces of data that have come in in recent days or during the intermee�ng period. And so, it is useful, but it's not really a point where you can change the decision on that par�cular day. But I think you can have tremendous influence on monetary policy by leading the discussion over the 365-day mee�ng that's occurring all year long, and especially if—on certain occasions, I do think that the commitee gets out of line with Page 9 of 20 reality and you start to get too much groupthink going in a certain direc�on and that's a good moment for individual members to call that out and to make the case that maybe we should be doing something a litle bit different. I also think that the big commitee is extremely helpful in the sense that you have presidents who are not inside the Beltway or in New York City. They can play the role of muses in the sense that they can introduce poten�al policies that might be beneficial in the future but might not be ini�ally considered to be, you know, that useful on the day. So, I think that, the example I liked—I think I did some of this—but the example I like to give is my colleague Charlie Evans, who had the idea about thresholds, and we should during the twenty-teens, he was sugges�ng that we should not raise the policy rate un�l certain condi�ons were met with respect to unemployment or infla�on. And when he first gave those speeches, he was the only one that was talking about that. And he developed that posi�on. About six months later, those started to show up in policy alterna�ves. About six months a�er that, they actually got adopted as actual policy. So that was a case where you had Evans playing the role of muse saying, “Well, here's a way that we could make our policy more state con�ngent.” And ini�ally, you know, no one, I didn't even know what he was talking about. But then a�er a while that actually became policy. So that shows you how if the chair can't do that, the chair can't just muse about “well, hey, maybe we could do this, maybe we could do that,” because the chair has too big a microphone and it would be too jarring to introduce that kind of idea suddenly. So, the role was to socialize the idea and then shepherd it through to a policy outcome. So, I did some things that were like that, but that's a clear example of the role I think that the presidents can play. [00:30:29] Wheelock: So, you men�oned a minute ago about dissen�ng at a couple of mee�ngs, and I'm interested in your view about policy dissents and whether there's a strategic role in dissents. You know, as you know, some members of the commitee dissented serially, several �mes in a row, whereas other members never dissent. [00:30:48] Bullard: Yeah. [00:30:49] Page 10 of 20 Wheelock: I think by my count, you dissented four �mes. I could get the number wrong. But. Well, you know, what's the strategy? What's the threshold there? And is there a reason to dissent other than just… [Talking over each other]. [00:31:00] Bullard: Yeah, I mean, I respect my colleagues, but generally speaking, I think the idea that, you know, monetary policy took a wrong turn, you know, three years ago and therefore we're totally on the wrong track, and, you know, should be doing something totally different—without ar�cula�ng that more, more clearly, I don't think it's that effec�ve to say that we're just totally on the wrong planet, as far as monetary policy. I think it's far more effec�ve—I would recommend for anybody coming on of the commitee in the future that if you want to dissent, you should dissent for a good reason on that par�cular decision on that par�cular day and say, “this is not what you should be doing on this day.” And then you're ready to come back at the next mee�ng and say, well, the commitee could make the right decision at the next mee�ng, and you're ready to work with your colleagues there. So, I think, you know, it could be that you'd have mul�ple dissents in a row. But I think it’s probably most effec�ve to just have this idea about, you know, on this day, I didn't think that the policy choice was the right one. Now, I was going to say something else about this which is now slipping my mind. Oh, I was going to say that the idea of dissen�ng also is losing value, and probably isn't that informa�ve because people give their own views and their own speeches in between the mee�ngs. So, if you come out of the mee�ng and you're kind of lukewarm on a par�cular decision, then that's going to come out in the speech that you give. And does it really mater if you actually dissented at the mee�ng or even if you were actually vo�ng at the mee�ng? You know, you could say, and I have done it where I said, “well, if it had been up to me, I wouldn't have done it that way. I would have done it this other way.” And so, since everyone's giving their views all the �me, which is part of the transparency juggernaut unleashed by Bernanke. What does it really mater, you know, if you formally dissented or not? How important is that really? You also had the specter of Kevin Warsh going along with a decision at one point and then coming out with an op ed the next day saying he actually opposed the decision. So, I think it's great. It's a very collegial organiza�on. And I do think it's great that the organiza�on rallies around the chair. The chair does a great job of trying to split differences between people on the commitee. But since you have all the views of everyone on the commitee, if they're communica�ng regularly, observers can assess for themselves. Here's where the commitee's at; here's the arguments that the different people are making. And they can assess for themselves about what that means for the future direc�on of monetary policy. [00:34:13] Page 11 of 20 Branding: Jim, at the �me of your re�rement announcement, you were the longest si�ng Reserve Bank president and FOMC par�cipant, 15 years, and you’ve been at the Fed for more than 30. During that �me, a lot of the history that you’ve covered so far, including being part of the centennial commemora�ons, and I think about that �me, at least that I’ve been here throughout your presidency, you’ve kept Fed history and the Bank’s legacy in front of us. The Bank has a reputa�on as a historic leader on monetary policy. So, I’d like to hear more. How do you see the St Louis Fed’s role historically and did your percep�ons about that role change at all during your presidency? [00:34:57] Bullard: I see the St Louis Fed as part of the world's leading central bank, but it's an iconic part of the world's leading central bank. It has a great tradi�on of suppor�ng economic research. This was the first Bank to sort of get serious about academic style research inside the central bank. That model was later copied, especially in Minneapolis, but now all around the Federal Reserve System. You've got very powerful research groups in Chicago and San Francisco and elsewhere around the system. So, what was once innova�ve and unusual became commonplace throughout the system and not only in the in the U.S., but now around the world, as has become standard in central banks to have very good research teams that sort of straddle the academic literature and the literature that you would read in the economic journals, and also the day-to-day policy issues that central banks face. So, it's iconic in that sense. And also, our emphasis on data, data collec�on and the power of understanding the facts is something that was unusual in, let's say, in 1958 when Homer Jones originally came here, but became more and more commonplace over �me. And now is epitomized by our FRED and friends database that’s free for all users around the world. And I think there's s�ll blue sky ahead for that, that could expand even further, and we could do even more in that dimension. But, you know, to open up the Wall Street Journal every day and say, you know, look at a chart and it says St Louis Fed. I think that that shows that we're the people that are dedicated central bankers who, we know the history, we know the nity grity, we know all arguments, we know all the data. We're sort of at the center of the ac�on, not that there aren't other great players. There certainly are across the country, across the Fed, across academia and around the world. But we're sort of, you know, the leader for the system, I think on sort of understanding central banking in a scien�fic sense and trying to get to beter policy through that channel. So, there are certainly other iconic places in central banking. The Bank of England comes to mind, a 350-year history, and others. But I think we can rival many places around the world, and I think that's part of what makes it a great place to work. Page 12 of 20 [00:38:09] Branding: Well, you talk about FRED, and that brings up the topic of innova�on. And during your �me as the CEO of the Bank. One of your priori�es was to encourage innova�on at all level levels of the Bank. You created an innova�on ini�a�ve, and you created the President’s award for innova�on. You know, why do you see innova�on as important for the Bank? [00:38:31] Bullard: So, you're working for a public ins�tu�on that does not have a botom line. And in business, it’s that botom line that usually spurs the innova�on. Sales are down, you beter figure out a way to get sales up or else you're going to have to lay people off or shrink your business. And we don't have that. So, I think it's incumbent upon the management of the Bank to create incen�ves to innovate, even in an environment where you don't have that profit mo�ve or that botom line. So, that's what the President's Awards were about. I think another aspect of it is that we're part of a federal system. We're just one part of that system. We want to find a role to play within that system that makes sense for the St Louis Fed, but also provides great service back to the central bank as a whole. I think we’ve found many ways to do that. We've created many brands during my tenure, and I like this idea of branded things. They might be a small group, might be four people, might be ten people, but you're doing something for the system as a whole that isn't ge�ng done elsewhere and is important to the system as a whole. And I think that's the kind of innova�on that we've been looking for. And we again, we have many of these across the system. Of course, the Treasury func�on has grown drama�cally. It was at one �me four people. It's now over 500 people. So just shows you the kind of exponen�al growth we've had there. But that's not the only one that has grown over �me. And I think we've got many smaller businesses that will prove to be even more important going forward. And we'll set the St. Louis Fed up for a great performance over the next couple of decades. [00:40:29] Branding: Jim, you talked a few minutes ago about the COVID pandemic and how it changed many things. So especially I'm thinking how people work and how the economy works. What were some of the biggest impacts of the pandemic that you had to deal with as CEO of the Bank? Page 13 of 20 [00:40:47] Bullard: Yeah, the pandemic was, you know, unan�cipated and a very special situa�on. I think the unprecedented nature of the health threat and trying to somehow get, come to grips about how to handle the health aspect of it, but s�ll get our work done. I think the Bank did a great job partly because we had a great Bank culture going into the pandemic and we knew each other going into the pandemic, that we were able to do much of our work during the first phases of the pandemic knowing each other. But the pandemic also, you know, we had built, we spent a lot of �me on Bank culture. A lot of that was sort of personal interac�on and making sure that we knew each other and interacted a lot. I think gradually the pandemic eroded that and we're just now trying to earn that back and win that back. I think, you know, we hired hundreds of people during the pandemic. They came in as virtual workers and weren't used to the pre-pandemic culture that won best workplace awards in 2016 and in 2018, I guess. And so now we have to think about how to rebuild that culture. I think we're doing that. But it's been a long process. It's not just us. It's all of corporate America that is struggling with these issues. We're not against technology. We certainly love remote technology, and we try to be very innova�ve in that dimension and use it effec�vely. But we also want a great high performing organiza�on that has great in-person interac�on. [00:42:39] Wheelock: Jim, I'd like to loop you back to monetary policy and the FOMC. So, at the FOMC, there've been a number of big changes over your 15 years as President. Now we have the chair giving press conferences a�er every mee�ng; there was the introduc�on of the summary of economic projec�ons or SEP; the publica�on of a statement on long run goals and monetary policy strategy, among other innova�ons. Which ones stand out as par�cularly important in your mind and influen�al for monetary policy going forward? [00:43:09] Bullard: Yeah, I would say that I was a big advocate of the chair giving press conferences. I thought we should meet an interna�onal standard on that; we were one of the later holdouts there. That it has happened now. So, the chair does give a press conference at every mee�ng. I think, again, that's part of the transparency ini�a�ve unleashed by Chair Bernanke. But I think the biggest innova�on was the se�ng of infla�on target in 2012, I chaired a small group of presidents in the first half of 2011, and at that point, Chair Bernanke wanted to get an infla�on target but didn't really have a mechanism for how to do it. We Page 14 of 20 started to talk, and the group spanned the dovish spectrum and the hawkish spectrum of the commitee, but the whole group was in favor of trying to get an infla�on target in place. That led to a provisional statement, which eventually became the statement of long-run goals for the commitee in January of 2012. So, we ini�ally got support from all the presidents, took it to the Board of Governors, eventually got the support of the Governors as well. So that was the— So, I think that the 2012 statement, it says a lot of things, but the main thing it says is that the U.S. will have an infla�on target of 2%. That meets an interna�onal standard. Other central banks all around the world had done this sooner. We were laggard on this. There's no reason we shouldn't have done it even sooner. But this was a mechanism for actually ge�ng this in place and realizing Ben Bernanke's goal of naming an infla�on for the U.S. I think that served us well, both during the period when infla�on was consistently running below the 2% target. It forced the commitee to ask and answer ques�ons about why are you allowing infla�on to be below target for such a long period of �me? Why aren't you doing more to get infla�on to move toward target? And aren't you at risk of becoming Japan? Japan has missed its infla�on target for about a quarter of a century depending on how you measure it. So, you know, with kind of a ques�onable consequences for the Japanese economy. So on the other hand, when infla�on did take off post-pandemic and in 2021, the 2% infla�on target again gave us an anchor to hold on to and to refer to repeatedly and the commitee has certainly been completely united, as far as I know, on this subject, and has repeatedly said, well, you know, we have an infla�on target, it is a credible infla�on target, and we intend to get back to that. And it's that credibility itself that will help us get infla�on back to 2%. As I'm talking today, at least headline infla�on, which at one point I guess was over 9% on an annual basis, now down to about 3% on an annual basis. So, if you look at just the headline number anyway, it seems to have been very successful. There are other aspects of that debate that are going on now. But if you just look at that graph, it certainly looks like the 2% infla�on target has helped us enormously as we've tried to navigate the post-pandemic world. [00:47:11] Wheelock: So, let me throw you a curve ball and ask a follow up ques�on. Are there any changes you'd like to see the FOMC make that it hasn't made? What would improve the process? [00:47:21] Page 15 of 20 Bullard: Yeah, I think the main thing here is the summary of economic projec�ons which was put in place rather quickly, I thought, and with maybe not enough, the a�tude at the �me was, “Oh, we'll try this out and then we can modify it going forward,” but once it got in place, it proved very hard to modify and you s�ll have a situa�on where it's unclear if the summary of economic projec�ons can be changed in any meaningful way because of many factors around it. So, you know, the various pieces of the summary are not linked together. So, you're not sure which unemployment forecast is supposed to go with which infla�on forecast or which interest rate forecast. It's you know, you've got this chart about dots. These are, the �ming is off. The �ming is on an annual basis. So that as you go through the year, the �meline gets shorter for the current year. You've got this problem that the September SEP is basically predic�ng what's going to happen at the November and December mee�ngs, which is very weird. You're basically plo�ng out exactly what you're going to do without knowing what the date is going to be over that period. That has goten us into trouble a few �mes when the data doesn't cooperate or doesn't go in the right direc�on compared to what people were thinking in September. So, I think that's something that would require a lot of effort. Different people have looked at it and kind of stayed away from trying to change it. And so, we're kind of stuck with subop�mal arrangement on that. I think one aspect of this is that the staff forecasts could be published and that is what other central banks do. And we have not done that in the US, although it seems like aspects of the staff forecasts do seem to be ge�ng into the press more than they were historically. So maybe there will be a trend toward releasing a more official forecast from the Federal Reserve than just the dot plot. Also, the dot plot gets stale very fast. As soon as new informa�on comes in, 30 days later, people are already changing their posi�ons slightly from what they would have been at the �me of the dot plot. So, if that's what's going on, then why aren’t you upda�ng on a more a more con�nuous basis? So many aspects to this, but I think the idea of the dot at the �me was to signal that the commitee was really serious about keeping interest rates low and not going to raise interest rates any �me soon, given that infla�on was below target. And in that sense, it was successful. But once you're away from that situa�on, it's not so clear that the SEP is playing the same role that it played at that �me and now it's maybe at �mes has caused more problems than it solved. So that's a major challenge for the commitee going forward and there's not an easy solu�on. [00:50:40] Page 16 of 20 Wheelock: So, you were out front in arguing for state dependent monetary policy, the aggressive use of large-scale asset purchases, par�cularly to avoid a low infla�on trap and other things. And I'm wondering to what extent were your policy views informed by your research? You're a prominent macroeconomic researcher, well published. How do you view the role of research, par�cularly in shaping your own personal policy views? [00:51:09] Bullard: Yeah, I mean, on the issue of the trap that the Japanese seem to have goten in over the last 25 years, I think it's been a crucible for the macroeconomics profession and the monetary policy component of the macro profession, because no one seems to have a very good explana�on. But this is a case where I think there is a piece of literature that’s purely theore�cal, or at least the ini�al atempts at it, were purely theore�cal. It's been Benhabib, SchmitGrohé, and Uribe papers on The Peril of Taylor Rules, which is about 20 years old now. But they, you know, you might say, well, this is dressed up in and some all these theore�cal arguments, but it’s actually a very simple argument if you if you pick it apart. And it suggests that there definitely is an equilibrium, not just a temporary situa�on, but a long-run equilibrium that would have infla�on be very low and nominal interest rates be very low, and that this could persist prety much indefinitely. And the refusal, I would say, within the Federal Reserve system and across the profession to acknowledge this equilibrium—these are published papers in major journals and major players, I would say, in the in the profession—and the refusal to acknowledge this I think was a deficiency of judgment in the profession and the willingness to bring up other arguments and somehow dismiss this possible outcome when you have a major economy, prety much as an example of ge�ng stuck there, wasn't just a theore�cal possibility, but a reality. So, I think that we did a good job during the post—so, I published this paper, The Seven Faces of the Peril, which illustrated these points. I did think that the commitee, generally speaking, did a good job of trying to stay out of the Japanese situa�on during, let's say, the 2010 to 2019 period and manage to keep infla�on from sinking even further away from the 2% target, on the low side. Europe, I think, did not. And before the pandemic, Europe appeared to be prety much stuck in the same equilibrium that the Japanese were. The pandemic came along and sort of rescued the whole thing. A big enough shock, I guess, can knock you out of anything. And now we're struggling to get back to an equilibrium where infla�on’s back at 2%. So, but it's a major lesson and will be studied for years in the literature. But I don't think you should dismiss the low infla�on, low interest rates, steady state. Page 17 of 20 [00:54:23] Branding: Great. Okay, I'm going to fly the airplane higher and talk about the Bank itself. And the moto for this Bank, which is “Central to America's Economy”, was born on your watch. So, tell us how you think the Bank measures up to that ambi�on. [00:54:39] Bullard: Yeah, I've always liked that as a moto. I think it cuts a lot of different ways. We are part of the central bank, so the central no�on comes in there. We're in the middle of the country, that comes out. The idea that we play an important role within the world’s leading central bank, that comes out of the model. So, I think it fits the ins�tu�on well. It's a litle bit more zippy maybe than some of the other central banks. You know, when we had consultants in talking about it, they said, well, dedicated public servants or, you know, something like that. And I think you want to—those are fine, and we are dedicated public servants—but, I think you want something a litle more with a litle more pizzazz than that to sort of illustrate the iconic nature of the ins�tu�on and the role that we've played in the postwar U.S. monetary economics and macroeconomics world. So, I've always liked it, but, you know, I don't know, maybe there'll be a brand refresh a�er I leave, but we'll see. [00:55:58] Branding: Okay. My last ques�on. So, the Fed, the Federal Reserve, it’s a constantly evolving organiza�on. From your perspec�ve, what are the biggest challenges and changes that you see for the Fed going forward? [00:56:12] Bullard: Yeah, I think the challenges are—the biggest challenges are very clear, I think. It's the evolu�on of the payment system in the banking world. How is this going to—it's been evolving for 30 years, you have far less banks today than you would have had 30 years ago. But probably even more important, you have a larger and larger frac�on of financial intermedia�on occurring outside the banking system. You've got foreign players in. So, it's very unclear how this is going to proceed now going forward. Silicon Valley con�nuing a pace to dominate the world. They absolutely want to dominate the payments space as well. So, this seems like it is changing the whole paradigm of how we think about monetary policy, how we think about banking and payments, how we think about bank regula�on. So, these things are all very integral to central banking. And, you know, it's happening every day. So, there's a litle bit of the frog in the pot element to it. Page 18 of 20 But on the other hand, you know, if you look out 30 years, it's going to be a different world 30 years from now than it is today, or even five years from now or one year from now. So, I think the other thing about this issue is that some�mes it appears that there's a lot of things being talked about, a lot of things going on, but nothing is really happening. And then one day you wake up and they get the killer applica�on, and everyone adopts that applica�on and the whole thing really collapses very suddenly. We certainly saw that with check processing, and I would just hold that out as an example. When the Minneapolis Fed built a new building in 1973, they did a study and it projected that there would be no checks being processed in 1977. And so, they built the building without much in the way of a check processing facility, but they were wrong by about 20 years. And so, by the �me they got to the late nine�es, they were again building a new building. And at that point they decided checks were here to stay. So, they built some check processing facility. But then check processing actually declined precipitously very shortly a�er that. So, I think that's the kind of thing when you were si�ng there in 1973, you're saying to yourself, these paper checks, it can't go on forever, surely there's going to be more sort of database processing of payments. But to get the �ming exactly right was a big ques�on mark. So, the Internet had to come along, and then other types of changes had to come along. But when it did, then check processing went down very drama�cally. That reduced employment in the Federal Reserve on the order of 30%. You had to manage that down over just a couple of years, basically down to close to zero compared to where you were before. So, I would just take that as a cau�onary tale about—it might seem like not too much is happening, but then, you know, it doesn't change, doesn't change, doesn't change, then all of a sudden it changes. So, I would say innova�on in banking might be similar to that, where it appears like people are going to con�nue exactly the same way forever, but then all of a sudden, they all change all at once. [00:59:52] Branding: Dave, any more ques�ons? [00:59:54] Wheelock: No. Thank you, Jim, very much. [00:59:56] Branding: Jim Anything else? Page 19 of 20 [00:59:57] Bullard: Nope. I'm. I'm all set. I’m talked out here. [Laughs.] [01:00:00] Branding: Well, Jim Bullard, thank you very much for your service to this Bank, to the Fed system and to the na�on. We wish you the very best. [01:00:09] Bullard: Thanks very much. ### Page 20 of 20