SEC-USC Diversity Symposium Remarks
Marshall School of Business, USC
Los Angeles, California
September 11, 1998
Robert T. Parry, President, FRBSF
Good afternoon. I'm honored to be here with you to discuss your opportunities
in the financial services industry and the academic paths leading to them.
I'm also grateful to the sponsors of today's symposium for inviting me,
so let me say a word of thanks to the Marshall School of Business at USC
and the Securities and Exchange Commission.
As some of you may know, I'm not the first Federal Reserve official
to speak publicly on diversity in the financial services industry this
year. The first was Alan Greenspan, Chairman of the Federal Reserve System.
He spoke in January--on Martin Luther King's 69th birthday--at
the first anniversary of Jesse Jackson's Rainbow-PUSH Coalition/Wall Street
Now, Chairman Greenspan is famous--or, should I say, infamous?--for
saying things in a way that sometimes leaves people scratching their heads.
In fact, he once said, "If I seem unduly clear to you, you must have misunderstood
what I said."
But last January he was duly and perfectly clear. He said, "Although
the image of free market capitalism has been elevated throughout the world...,
the application of it within the United States, its largest adherent,
is regrettably incomplete. Too many barriers still prevent the free flow
of capital and people to their most productive employment."
In my own words, let me add that those barriers are all too longstanding,
and indeed, all too perilous for our economy and our society. Those barriers--racism,
sexism, complacency about the status quo--are destructive, cruel, and
wrong. They're destructive in that they crush individual initiative and
cut into our productive capacity. They're cruel in that they snatch away
hope. And they're wrong in that they betray the moral foundations of our
society. At the San Francisco Fed, we're continuing to work to pull those
barriers down. In fact, we're now working on plans for enhancing our affirmative
action program as we approach the year 2000.
But the focus of today's discussion isn't the Fed's affirmative action
program. Instead, the focus is on you--on what kinds of career opportunities
are out there for you, and what you can do to prepare for them.
As a spokesperson for the Federal Reserve, I'll start by describing
what kinds of opportunities our organization can offer. I want
to emphasize that the Fed is a public institution, established
by the Congress. And though it has a District Bank in the heart of Wall
Street, and though it plays a pivotal role in the financial services industry,
it's a far cry from the images you might have seen in movies like "Wall
Street," or "Bonfire of the Vanities." The Fed is not the world
of high-rollers making megadeals, and it's not the world of Armani
suits--as you can clearly see--and it's certainly not the world
of fabulous salaries.
But what it may lack in glitz and glamor, it makes up for in influence--because
one of the main responsibilities of the Fed is setting the nation's monetary
policy. Monetary policy influences all kinds of decisions people and firms
make in this country, because it affects the availability of short-term
credit in the economy. In the short run, that affects demand and economic
output, and in the long run, that affects inflation. So, when you're making
decisions like whether to get a loan to buy a new house or car or to start
up a company, whether to expand a business by investing in a new plant
or equipment, and whether to put savings in a bank, in bonds, or in the
stock market, you're being influenced by monetary policy.
Who makes the policy? All twelve Federal Reserve Bank Presidents get
together with Chairman Greenspan and the other six members of the Board
of Governors eight times a year to set policy. In support of that effort,
each of the Reserve Banks and the Board of Governors rely on their own
staffs of economists. These are mainly people with Ph.D.s in economics
who advise policymakers on the economy and who also do basic research--in
a sense, this staff is a lot like an economics department in a university
or college, except that their work focuses largely on monetary policy.
But there's a good deal more to the Fed besides monetary policy. For
example, we're involved in supervising and regulating much of the banking
industry. I know Bob Johnson is here from our L.A. Branch to talk to you
about that during the seminars. That area includes our Community Affairs
Department, which works to ensure compliance with the Community Reinvestment
Act and helps develop programs to promote lending to minority businesses
and individuals. We also have a whole range of other operations,
including the payments system. Every day, the Fed helps keep billions
of dollars circulating in the economy through its operations in cash and
currency, check-clearing, electronic funds transfer, and even "smart card"
technology. By law, the Fed competes with other service providers in this
area, and we support that effort with a staff devoted to sales, marketing,
and product development. These and other Fed functions are described more
fully in the pamphlets we sent here for you. All together, over 2,500
people are employed by the San Francisco Fed and its branches alone--and
in the whole nationwide System, including the Board of Governors, there
are over 24,000. These employees also include, of course, people who work
in human resources, public relations, accounting, financial planning,
information technology development and support--we even have webmasters!
So you can see that there's a vast range of types of work to be done in
the Fed--in other words, there are job opportunities that are suitable
for many career paths.
Now, how do you get going on that career path? Unquestionably, you need
a good education--and that's true not just for the Fed, or for the financial
industry, but for any business. I'm pleased to say that the San
Francisco Fed is well aware that an education isn't something that stops
after high school, or even after college or graduate school. We have a
strong in-house management development program. And we also have a competitive
tuition reimbursement program for employees who want to further their
education at local colleges or universities.
Now, what do I mean by a "good education"? I don't mean that
you have to focus exclusively on business or finance courses. But I do
think a "good education" these days should include a solid grounding in
economics. Why? Because economics is basically the study of how markets
work--and wherever you're finally employed, you're going to need
to understand how market economics affects your decisions. Let me give
you three examples.
First, there's the overall economic environment in which you and your
company operate. This is affected by things like interest rates, exchange
rates, tax laws, the unemployment rate, inflation, and so on. For example,
suppose you're deciding whether to build a new plant or open a new office.
Your decision will depend in part on interest rates, because you'll probably
be borrowing to finance that expansion. Now suppose you have the option
to expand overseas. In that case, you'll need to understand the implications
of exchange rates on your bottom line.
Another example is the market in which your firm actually competes to
sell its product. You'll need to understand the relationship between supply
and demand to price your product correctly. And this applies whether your
product is ice cream or investment advice.
Finally, there's a market within your firm. Some firms are moving in
the direction of encouraging their employees to behave like entrepreneurs.
In other words, employees aren't just supposed to wait for orders from
the boss--who gets orders from his or her boss--about what do. Instead,
they're expected to figure out what they themselves can do to
add value to the company.
These three examples illustrate the point that you can't escape the
influence of market economics in today's working world--so you'll be better
off if you know how to use it to your best advantage.
Let me make one final point about the study of economics. It not only
teaches us how markets work, it also teaches us about how markets fail
to work. For example, if markets were perfectly competitive,
race and gender differences--not to mention ethnic and religious differences--wouldn't
have any role to play at all. In other words, we'd never again see discrimination
on those grounds. And that would be great for the economy. More competitive
markets would mean that all the resources in the economy would
be put to their most productive uses.
But markets aren't perfectly competitive, and we still see
discriminatory practices. What's behind these market imperfections? Well,
some of the most interesting research on the economics of discrimination
has pointed to the role of networks--that is, the networks of
acquaintances and friends--especially in labor markets. The basic idea
is that these networks can act to exclude people. In fact, Kenneth
Arrow, a Nobel Laureate in Economics from Stanford University, recently
wrote on this point. He argued that because labor markets are especially
open to personal interactions, there's plenty of room for discriminatory
beliefs and preferences to play a role.
Although much remains to be done in terms of the formal modeling of
networks and markets, the basic idea makes intuitive sense to us all.
And what's especially interesting is that the basic idea of networks can
be used to work against discrimination as well. Let me give you
an example right from the San Francisco Fed. Our employee newsletter recently
interviewed Lelia Jones--she's an African American who just retired from
the San Francisco Fed after 32 years. Though she began with us as a secretary,
she rose to become Assistant Vice President of Consumer Compliance. What
do networks have to do with her story? Well, she felt she faced some discrimination
as she progressed in her career. And part of her response was to build
a network of mentors, which included her own managers and others in bank
management. She credits them with giving her invaluable support and guidance
as she struggled to weigh the costs and benefits of overcoming obstacles
and capitalizing on opportunities. More important, as her own position
improved, Lelia Jones became the nerve center of a network for other women
and other minorities who were trying to follow in her path.
I'd like to close this speech by drawing out the two lessons I think
we can learn from this admirable woman's experience.
- First: Find a mentor--or better yet, several mentors. They
can give you not just insights into how to function in the system and
even how to get ahead. They also can give you the moral support and
encouragement to believe in yourself to keep up the effort.
- Second, and perhaps more important: Become a mentor. Take
the time to share what you know, whom you know, and
how to find out more.
These two lessons are by no means a full answer to the problem of discrimination
in our society, in our economy, and indeed, in elements of the financial
services industry--whether that discrimination is conscious or not. But
they do hold the promise of making a difference. And that difference can
strengthen the position of women and minorities in the working world of
It has been a pleasure and an honor to speak to you today. You have
all my best wishes for success--in your education today and in your career