Minding the mint: LaVaughn Henry speaks at Xavier
By Felix Winternitz
Famous guest lecturers have been known to roll up to Xavier’s Cintas Center in a chauffeured limousine or CEO’s Rolls Royce.
Not too many, however, arrive in a Brink’s armored car.
For LaVaughn M. Henry, the latter may seem more appropriate. As vice president and senior regional officer for the Cincinnati Federal Reserve Bank, Henry runs the day-to-day operations of what is best termed the Queen City’s own Fort Knox.
[Take a tour of the Fed's vault with Henry]
Taking time out from his day job, the Jesuit-educated Henry addressed faculty, students and alumni in mid-October at the Williams College of Business “Distinguished Speaker Series.” This top banker’s topic: “Lessons Learned: Monetary Policy and its Role in Addressing the Financial Crisis of 2008 and the Recovery from the Great Recession.”
Regarding the current home loan and foreclosure mess, Henry’s brutally candid view was this: “No one’s hands in this are entirely clean. Regulators took their eye off the ball. Bankers were at the table, too. And borrowers went ahead and signed. ... You can make the argument that it’s over-regulated now because it should have been regulated more [then].”
Re-fi packages were handed out indiscriminately, as well, with homeowners jumping to spend any gains on unnecessary luxury items. “Everybody just had to have flat-screen TVs in every room to watch the Bengals’ games,” he told the crowd assembled at Cintas’ Duff Banquet Center.
[Read a profile of Henry]
Henry has spent a lifetime in the worlds of corporate and government fiscal policy. Waving his hands in an animated style and never referring to notes during his luncheon conversation, Henry addressed a number of constituencies and their concerns:
• To those weary of current wage levels: “That’s the price of deflation. Just getting something cheaper [at the store] doesn’t always benefit you in the long run.”
• To those unhappy with current housing prices: “Housing is upside down. Right now, 23 percent of us have negative equity in our houses. Here’s a fundamental. The housing market will not come back in any substantial way until the unemployment rate goes down. … [The problem is] too many houses, too many contracts, too many people writing more housing loans than they should have.” Today’s foreclosures are only adding to the glut of excess housing.
• To those furious at the Fed: “The inaction of the Federal Reserve contributed to the Great Depression in the 1930s. We sat on the sidelines. Bank runs and failures resulted.” This recession is different, however. “We learned … early, aggressive policy intervention to address a financial crisis is superior to a ‘Wait and See’ strategy. We averted a depression” by offering excess reserves so banks could lend more.
Unemployment and depressed housing prices remain the American economy’s major challenges. His bad news: “We do not expect unemployment to go down significantly in the next two years.” This will continue to dampen the real estate market.
“Confidence in the business system is the ultimate determinant of where the economy will go,” he summarized for his Cintas audience, clarifying that it’s all about consumer confidence and expectations, about managing people’s uncertainty and fears.
“If you are pretty sure something will get cheaper next year, you would delay that purchase. You would wait to buy it. But getting things cheaper doesn’t always make sense [for society as a whole]. That is what dis-inflation is.”
The jovial Henry handed out bags of currency at the packed house (albeit shredded, and while qualifying that “I can’t provide the glue”).
Responding to questions from the audience, Henry answered a query from Xavier President Michael Graham, S.J., regarding the current Occupy Wall Street movement and how it should be seen as an indicator of citizen disaffection. “My quick, concise message to them is, thank you for doing your American right and letting your voice be heard. But if you have a goal, base your goal on fact, and I’m talking about both sides of the political spectrum. … Not what you feel, or the flavor of the day, but rational, fact-based fixes. But, thank you [to the protesters] very much for raising the issues.”