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2010 Letter from the President
It's a privilege for me to write this letter introducing our annual report, my first as president and chief executive officer of the Federal Reserve Bank of San Francisco. As I take on this new role, I feel a keen sense of responsibility both to the Federal Reserve System and to the communities of the Twelfth Federal Reserve District, who rely on us to safeguard the financial system and set a prudent course on monetary policy. I want to express my gratitude to the Bank's board of directors and employees who make the San Francisco Fed the superb institution that it is. And I want to honor my predecessor, Janet Yellen, whose wisdom and exemplary stewardship made this Bank a leader not only in the Federal Reserve System, but also in the wider world of global central banking.
This annual report comes at a time of transition for the economy, for the financial system, and for the Federal Reserve as a financial regulator. On the economic front, an acute financial crisis and a severe recession are now in the rear view mirror, but the scars of those events remain. The economy is growing respectably, and we are finally adding jobs at a decent pace. But so far we have recovered only a small fraction of the jobs we lost from 2007 to 2009, and we still have too many idle production lines, empty offices, and financial institutions at risk of failure. We avoided deflation, and prices overall have been rising at a very slow pace. Yet recently we've seen the cost of foodstuffs, energy, and other commodities soar, which poses potential risk to the economy.
This combination of circumstances calls for the utmost care in setting monetary policy. In the face of an extraordinarily severe downturn and slow recovery, Federal Reserve policymakers pushed short-term interest rates close to zero in 2008, and we have stated that we expect to keep them there for an extended period. As an additional stimulus to the economy, the Federal Reserve has been buying sizable quantities of U.S. Treasury and other securities. These measures have been essential to restoring economic growth. They are under constant review, and the Federal Reserve is prepared to adjust policy in light of changing economic circumstances.
I got to know the Twelfth District in my previous capacity as director of research at the San Francisco Fed. More than 20 percent of the U.S. population lives in our sprawling nine-state region, and its economy is the largest of any Federal Reserve District. This District is the nation's leader in such dynamic industrial sectors as agriculture, information technology, aerospace, and biotechnology. At the same time, the blows from the financial crisis and recession were felt with special force in this District in the form of high unemployment and the nation's worst housing crash since World War II, as measured by price depreciation and foreclosure rates. Recovery is under way, but its pace will be restrained by several factors, including the severe fiscal challenges of many state and local governments.
At the San Francisco Fed, our responsibilities extend beyond monitoring the economy and participating in monetary policy decisions. Among the most important of our duties is supervision and regulation of the financial system in the Twelfth District, a role that was significantly expanded under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, also known as the Dodd-Frank Act. This annual report explains the provisions of the Act and outlines what they mean for the Federal Reserve as a financial regulator. It also includes a Twelfth District banker's perspective on the Act. In the Twelfth District, we are mobilizing to take on these expanded responsibilities and ensure that this new era in financial regulation is successful.
We are also responding to provisions of the Dodd-Frank Act in other areas. During 2010, we established the Office of Minority Women and Inclusion, in keeping with the Act's requirement that all Reserve Banks set up diversity and inclusion offices by January 21, 2011. Among its functions, the new office will oversee the Bank's existing diversity and inclusion practices in management, employment, and business activities.
I am fortunate to work with extraordinary employees who have consistently demonstrated their commitment in the face of significant challenges. On the supervisory front in 2010, San Francisco Fed staff members contended with a bank operating environment still feeling the aftereffects of the financial crisis and recession. At the same time, Bank Supervision and Regulation staff members began taking on their new responsibilities under the Dodd-Frank Act. On the operations side, the Bank's check operations staff members met every target as they successfully transferred the Twelfth District's last check processing facility to the Fed's national consolidation site.
Many other Bank departments registered notable achievements in 2010. Community Development staff launched the Healthy Communities Initiative, a new research area examining the connections between community health and community development. Public Information began using social media such as Twitter and Facebook to deliver timely news and information. Staff members in our Economic Research Department made important contributions to understanding current policy issues and the dynamics of such macro variables as unemployment and inflation. Their work drew significant attention, both in professional circles and business news media.
I would like to take this opportunity to thank all of our employees for their outstanding efforts and public service during the past year. I also would like to thank our Twelfth District directors and Economic Advisory Council members for their invaluable service and counsel.
In particular, I would like to acknowledge the many contributions of retiring Chairman of the Board T. Gary Rogers, former chairman of the board, Levi Strauss & Co., San Francisco, California. Mr. Rogers completed six years of service to this Reserve Bank, the last two years serving as its chairman, preceded by three years as its deputy chairman. I also would like to acknowledge Arnold T. Grisham, former president, chief executive officer and director, Alta Alliance Bank, Oakland, California, who completed his service on the Head Office Board at the end of 2010, after serving three years as a director.
In addition, I would like to express my sincere thanks and appreciation to the other directors and Economic Advisory Council members who concluded their terms of service during 2010:
- on the Los Angeles Branch Board: Dominic Ng, chairman and chief executive officer, East West Bank, Pasadena, California; and James L. Sanford, consultant, Northrup Grumman Corporation, Los Angeles, California, who served as chairman of the Los Angeles Branch Board for three years;
- on the Portland Branch Board: Judith A. Johansen, president, Marylhurst University, Marylhurst, Oregon; and James H. Rudd, chief executive officer and principal, Ferguson Wellman Capital Management Inc., Portland, Oregon, who served as chairman of the Portland Branch Board for the past six years;
- on the Salt Lake City Branch Board: Edwin E. Dahlberg, retired president and chief executive officer, St. Luke's Health System, Boise, Idaho; Annette Harder, president, Herman Consulting LLC, Park City, Utah; and Michael M. Mooney, president, Idaho Region, Bank of the Cascades, Boise, Idaho; and
- on the Twelfth District Economic Advisory Council: Stephen M. Brophy, president, Page Land & Cattle Co., Phoenix, Arizona, who served as chairman of the council for the past three years and as its vice chairman for one year.
John C. Williams
President and Chief Executive Officer