[PODCAST] The Stewards of America’s Economy—with Dr. Raphael Bostic

by | Mar 3, 2020 | Community Engagement, Podcast

Dr. Raphael Bostic is the President of the Federal Reserve Bank of Atlanta and joins us to answer the question we’re all asking, “what is a federal reserve bank and what does it do?” It turns out they’re pretty important, having a role with setting interest rates, cash in circulation, and its mission as steward of local economies. We talk about how the Bank is a resource for local communities and businesses, and how those communities can benefit from working with the Bank.

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Episode Transcript

John Bwarie: Raphael, thanks for taking the time to talk with us about your experience in community. But what is the Federal Reserve Bank of Atlanta, and what does it do? Let’s just start at the top.

Dr. Raphael Bostic: It’s interesting. When I talk about the Fed, people have no idea what we actually do. The reality is that, if you’ve seen Hamilton, that is a representation of that argument that [inaudible 00:00:25] a central bank. We are the byproduct of that. So, remember, in the old days, they were arguing about should the bank be super centralized in Washington or should it be decentralized out in the States. They had a back and forth. There were two banks of the United States that were chartered. Both of them were allowed to expire and then were not rechartered. So through the 1800s, we did not really have a consistent central bank for the United States. In the late 1890s into the 1900s, there were a number of crises. The lack of a unified approach to banking was the problem. So they came and did a compromise. We’re going to do a little centralization and a little decentralization.

Dr. Raphael Bostic: So the Fed, the central bank, is really a blend of two types of organizations. There is the centralized organization in Washington. That’s call the board of governors. J. Powell is the chair of the board, and that’s seven people. They are appointed by the president. Then, in addition, there are basic private institutions called reserve banks, and there are 12 of them. Each reserve bank represents a part of the United States. So I’m in Atlanta. We’re the sixth district. So we have Florida, Georgia, Alabama, the bottom half of Mississippi, the bottom half of Louisiana, and the eastern two-thirds of Tennessee. So it’s a large district. It’s really diverse. So I have Appalachia. I have the Gulf Coast. I have energy, oil drilling. I’ve got military. I have Miami and the beaches. So you think about that. It’s a huge area, and incredibly diverse. When you think about the US economy, my district is 1/6th of the US economy.

John Bwarie: That’s how they’re divided, by the economy? Or-

Dr. Raphael Bostic: Well, I’ll get to that in a second. But I’m 1/6th of the economy, and it is actually a microcosm of the US economy. So the distribution of our economic activity in the sixth district almost matches perfectly with the distribution of economic activity cross-sectors, same manufacturing or tech or whatever that you would see in the US. So the sixth district is really a real nice snapshot of the US. So if I can get a sense of that, then I feel like I have a good sense of what’s happening in the country. We’ll talk a little more about that.

Dr. Raphael Bostic: So, anyway, you’ve got 12 districts. Each of those districts has a reserve bank. The reserve bank has members. So the state member banks in those districts are members of the reserve bank. They have shares, and they appoint members to a board. Actually, we have elections for the members of the board of directors. So I report to a board of directors for the Federal Reserve Bank of Atlanta.

John Bwarie: That board of directors is people from other banks that are members of the Federal Reserve?

Dr. Raphael Bostic: Well, I have nine board members. Three of them are bankers. Six of them come from businesses around the district, because what we want is the board to be representative of the economic activity of the district. So some of it is banking, but on my current board I have someone who works at UPS, someone who works in restaurants, someone who does housing development nationally and internationally. Then I have a small business person who does tech. So we try to set it up so that it’s a real diverse set of viewpoints and perspectives. So when we’re talking about economic performance, we’re getting input from people from the wide range of different perspectives.

John Bwarie: So that sounds set up. But what does it do?

Dr. Raphael Bostic: So we do a number of things. So first is monetary policy. That’s the part of the Fed that people are most familiar with. That’s controlling the rate of interest that banks are paid on very short-term lending. We call that the fed funds, right? What we do there is we adjust the rate that banks pay us for these short-term loans. That rate is a benchmark from which banks then charge all the other interest rates. So they want to charge a margin over that so that they’re getting some return, and so by raising it, that means that things they’re going to lend out into the future are going to have higher interest rates, which will put a constraint on the economy. By lowering it, that’s stimulative. The interest rates that you get for your loans are going to be lower.

Dr. Raphael Bostic: So there’s a committee called the Federal Open Markets Committee, or FOMC, that sets the fed funds rate. We go to Washington every six to eight weeks, and we vote on it. We have a whole set of deliberations and a vote. Now the FOMC is made up of the seven governors who were appointed by the president, and then the 12 presidents of the reserve banks. So there are 19 members of the FOMC. Now at any one time, even though there are 19 members, only 12 vote. The seven D.C. appointees always vote. The New York fed president always votes, and that was done because the New York fed president oversees these large banks. There’s a big banking center, and they’re going to have a lot of insight. Then they divide the other four votes among the 11 presidents. For example, Atlanta, I share a seat with St. Louis and Dallas.

John Bwarie: You rotate?

Dr. Raphael Bostic: We rotate. So every year one of us has it. So I had it in 2018. I will have the vote again in 2021. Chicago and Cleveland, they share one. So at any time in the voting, seven board members, who are called governors, from D.C., and then five bank presidents, who are the voters.

John Bwarie: Is this designed to be complicated?

Dr. Raphael Bostic: Yes, yes. In fact, it’s designed to really reflect the blend that I was talking about to start, this blend of federal versus state level and to try to have some balance and make sure that input comes from all over the country. Because we in the reserve banks, we have much closer relationships with the businesses and the banks in our areas than folks in Washington will. So we do come with some specialized information that can help inform our decision making.

John Bwarie: So that’s the monetary policy.

Dr. Raphael Bostic: That’s monetary policy. Then the fed is also a bank supervisor and a regulator. So we are responsible for making sure that the banks that we oversee, which are banks that have state charters and have agreed to be members of the federal reserve system … Our charge is to make them make sure they’re operating in a safe and sound way and that they’re lending responsibly. That’s a function that is … It resides … The authority resides in D.C., but the board there has delegated the implementation to examiners in the reserve banks. So I have, I think, 350 examiners who go around our district examining banks. They set up an exam. They pull files. They see what the lending standards are. They see if banks are exposed too much in, say, real estate or in multi-family lending or oil investment, and they make some assessments about how strong and resilient they are.

John Bwarie: So in 2007, were there examiners out there?

Dr. Raphael Bostic: Yes, there were.

John Bwarie: I know you’re not in the position [crosstalk 00:08:29]

Dr. Raphael Bostic: I’m glad you clarified that.

John Bwarie: I’m not asking you to criticize your predecessors. But would this process theoretically catch some of that?

Dr. Raphael Bostic: It should have. So in the Great Recession, there were more bank failures in the sixth district than anywhere else. Much of it was tied to real estate, and there was some let’s just say differing opinions about what kind of concentrations a bank could have in real estate that would be prudent and safe. The people [inaudible 00:09:08] at the time were willing to see banks being more concentrated than that, than it turned out was prudent and safe.

John Bwarie: Does that change the way that you look at it?

Dr. Raphael Bostic: It totally changes the way we look at it. It changes the way we’ve approached it. One of the things that I have said many times in this role is that I never want to be 12th out of 12 again. I don’t want to be the worst in that performance, and so I’ve really encouraged my staff. If they see something that makes them nervous, they need to bring that up early and work with the banks to come to an agreement on is this really okay. What kind of risk are you really taking on? Have that engagement early enough so that mitigation can happen and adjustments can happen so that we don’t wind up in a situation where, if something goes badly, these banks are going to go under. So we’ve really tried to step up our direct person-to-season communication with the banks.

Dr. Raphael Bostic: I actually talk to a lot of bankers from my district now. So the biggest banks in the district, I meet with their leadership three or four times a year in Atlanta. They come to Atlanta. Then I talk routinely or regularly with smaller groups of bankers when I go out into the field. Or we host some conferences periodically. So I try to get in front of them. I try to have some relationships with them, because it’s never good when your first conversation with someone is we’re shutting you down or you’ve got to stop doing this lending.

John Bwarie: How many banks do you have as part of your membership?

Dr. Raphael Bostic: So that’s a good question, and I don’t have the exact number for you.

John Bwarie: Range. Are we talking hundreds, thousands?

Dr. Raphael Bostic: It’s probably in the 800 to 900-

John Bwarie: So a manageable number [crosstalk 00:11:01]

Dr. Raphael Bostic: Right. Most of them are small banks.

John Bwarie: Right, one branch, two branch style.

Dr. Raphael Bostic: And then small towns. So if you look at the sixth district, most of it is not big cities. So there will be maybe a community bank in Tifton, Georgia, or these small towns, Meridian, Mississippi.

John Bwarie: Did you know those places before you got there?

Dr. Raphael Bostic: Absolutely not.

John Bwarie: So let’s get back to that diversity of your district, because you also have … You said Miami.

Dr. Raphael Bostic: I have Miami, yeah.

John Bwarie: New Orleans?

Dr. Raphael Bostic: I have New Orleans.

John Bwarie: So you have Miami, New Orleans, Atlanta, I mean, all the big cities that are in your district [crosstalk 00:11:35]

Dr. Raphael Bostic: I have Nashville.

John Bwarie: We’ll come back to that in just a minute. So you’re doing monetary policy. You’re doing-

Dr. Raphael Bostic: Bank regulation and supervision.

John Bwarie: … bank regulation and supervision.

Dr. Raphael Bostic: The third thing we do is payments. The fed, writ large, as an institution, is really heavily integrated in the payment space. So, first, every dollar is a Federal Reserve note. So we are responsible for getting cash into the system.

John Bwarie: Physical cash?

Dr. Raphael Bostic: Mm-hmm (affirmative). So what happens is that, when banks feel like they need cash, they put an order in to whichever federal reserve bank they engage with. Then we prepare the order. They send a Brinks truck to put the cash in the Brinks truck.

John Bwarie: But you’re not printing cash, just to clarify.

Dr. Raphael Bostic: We do not print, right.

John Bwarie: [crosstalk 00:12:25]

Dr. Raphael Bostic: That’s Bureau of Engraving in Washington. I think they do all of it at this point. No, so we actually call them and say this is kind of what we’re going to need. Then we have an interaction with the banks.

John Bwarie: You have a vault?

Dr. Raphael Bostic: Yeah, we have some money. We’ll just leave it at that.

John Bwarie: Have you noticed? Is there a trend? This is a personal privilege [inaudible 00:12:48] ask you this, totally unrelated to our topic. Are people using less cash?

Dr. Raphael Bostic: So it’s interesting. No.

John Bwarie: No?

Dr. Raphael Bostic: So the demand for cash has actually doubled since 2010.

John Bwarie: Really?

Dr. Raphael Bostic: Yes. There’s been some analysis of this, and some of it is going overseas. So the dollar is still viewed as a currency that is retaining its value. So if you think about Venezuela where inflation is going crazy, people have value. They’d love to get a chance [inaudible 00:13:20] because it will be secure, and they will preserve their position. So we are definitely seeing some of that. But the cash isn’t going away anytime soon. Now I know you young people are in a place where you don’t really use cash nearly as much, but it is still around. It is still being demanded, and we have that as an operation.

John Bwarie: So from where you sit, just to follow this trail a minute, there’s movement for restaurants and other retail establishments to not take cash. For the safety of our employees, we do not accept cash. I don’t know if you’ve seen that in your district, but it’s happening here in Los Angeles. Is that something that you’re aware of? What does that mean from your perspective as a keeper of cash and as sort of someone who looks at payments and physical dollars.

Dr. Raphael Bostic: So I’m not seeing that, per se. What I would say is I’m agnostic on how people want to pay. However you want to do it, that’s fine. The thing in this area that makes me a little concerned is that there are still lots of communities and subcultures in the United States where cash is how they operate. If you go too heavily into this, meaning not using cash, you may be disadvantaging the people in those groups and from those communities from being able to take advantage of services and the like. So I’ve been of a mind recently to think differently about financial inclusion. Usually, it’s been about do people have bank accounts.

John Bwarie: Right, under banked areas [crosstalk 00:14:56]

Dr. Raphael Bostic: Right, unbanked [inaudible 00:14:57]. But I’m not starting to think, well, no, let’s not forget about people who prefer to use cash. Are we tilting things so heavily against them that they are now going to be inconvenienced? So it goes back to what I said to start, which is agnostic. We should make sure that our systems can accommodate people however they want to pay for whatever they want to pay for.

John Bwarie: Do you carry a lot of cash? I’m just kidding.

Dr. Raphael Bostic: No, I don’t. But I always carry … Well, I’m not going to talk about that.

John Bwarie: [crosstalk 00:15:28]

Dr. Raphael Bostic: So we have cash. Then there’s wholesale payments. We call wholesale … Most people think about it as wire transfers. So the Federal Reserve has a function called Fedwire or a service called Fedwire where we have the hardware, the actual rail that wire transfers go over. So if you do a wire transfer, there’s a good chance you’re using Federal Reserve infrastructure to execute it.

John Bwarie: Physical infrastructure?

Dr. Raphael Bostic: Mm-hmm (affirmative).

John Bwarie: You maintain it?

Dr. Raphael Bostic: The Fed does. That’s run out of the New York Fed. When we have retail payments … So retail payments is basically all the complicated things that happen in a retail space. The thing that’s interesting with that is, say, when you go to a Target and you give a credit card or debit card, you’re basically saying I authorize Target’s bank to take money out of my account that may be in a different bank. So if you both have the same bank, that process is straightforward, because the one bank controls both of them. If it’s in two different banks, now you have to find a way to clear it and settle it over time. The Fed has an infrastructure that facilitates that as well. We’re not the only one, but we are an important provider of that service. So I tell people all the time the Federal Reserve touches you every day.

John Bwarie: And you don’t even know it.

Dr. Raphael Bostic: People have no idea. On some level, that’s a good thing because it means that it’s working and it’s going well. But on another level, it can be difficult because people don’t really appreciate the value of the institution. I think that it’s important for people to understand the value that we are providing. So I try to talk about this. So that’s the third thing we do.

Dr. Raphael Bostic: The fourth thing we do-

John Bwarie: How many things are there, 57?

Dr. Raphael Bostic: No, no, no. We’ll get to five, maybe six. I’ll lump a bunch of them into the last one. The fourth thing we do is called community and economic development.

John Bwarie: Now you’re speaking my language.

Dr. Raphael Bostic: This grew out of an act called the Community Reinvestment Act or CRA. The CRA said that banks have … Actually, the CRA doesn’t say it like this. The CRA says that it’s important that banks are reinvesting capital from their communities back into those communities. It charges the regulators to set up a structure to check to make sure banks are doing that. So that’s what we do. As part of that, what we realized was that it’s important to really understand what’s going on in these communities to know what a good investment looks like, to figure out how communities can best use their capital. So every reserve bank and the board in D.C. has a unit that does that, and that’s the community economic development unit. I just call it community affairs. We have different names. But that’s kind of the function, so we do a lot of that.

Dr. Raphael Bostic: So we have relationship with people in communities. We have a relationship with bankers and funders to try to really encourage an appropriate type of investment in communities. I will say it’s important for everyone to know the Fed doesn’t do lending. We’re not market-facing that way, but we do have expertise and have a large network that can be leveraged to help people understand where there are some real good opportunities for investment. We might have a different appreciation for things than might have been conventionally thought.

John Bwarie: Do you oversee the CRA for your member banks in part of that supervisor role and regulation role? Because I know they have reporting requirements for CRA.

Dr. Raphael Bostic: They do. Many of the CRA … So, yes, but many of the [inaudible 00:19:39] Consumer Financial Protection Bureau, the CFPB. I think it’s the Bureau of Consumer Financial Protection. So it’s kind of a split function. So we have staff that do CRA exams, and the CRA exam is also in partnership with fair lending things and truth in lending and all those kind of things. So it winds up being a layered sort of oversight moving forward.

John Bwarie: So that’s big though, community and economic development. That means you know the people you’re-

Dr. Raphael Bostic: [crosstalk 00:20:15]

John Bwarie: You have to know the district well enough to be able to have expertise to be that role.

Dr. Raphael Bostic: Right. There are many different approaches to doing that. For me, what I thought would be useful … Actually, when I got to the bank, they had decided that the best way to approach that would be to have subject matter experts, have an expert in housing, an expert in community development, financial institutions.

John Bwarie: When you say expert, someone who’s done it a long time or someone who’s an academic who’s studied it?

Dr. Raphael Bostic: More research.

John Bwarie: You come from an academic background.

Dr. Raphael Bostic: Right. But what has been interesting, I think because of where the Fed sits, you’ll get people who are actually both. So, actually, in our bank, we have a Center for Work Force and Economic Opportunity. Those are people who … And the center’s focus is really on job retraining, skill building, and those sorts of things. We just hired someone who has done it before and also has the academic chops. So one of the things I think that we can do well is be that bridge between the hardcore academics and the hardcore practitioners to be able to speak both their languages and really facilitate learning being transmitted to the group that needs to do it. So we try to do that as much as possible.

John Bwarie: Is that something that had been done previously or something that you brought to the space? You’ve been there for about three years you said.

Dr. Raphael Bostic: Yeah, about three years. So we had done that. What I’ve tried to do is say we need to be more aggressive and assertive in making sure our knowledge gets to the decision makers. So the Fed is really good about having conferences. Everyone comes to the Fed. We have great conversation [inaudible 00:22:07], and then everybody goes and does what they do. There’s not that infrastructure that we have to do follow up to say, when you were here, Jackson, Mississippi, you said you had this problem. We talked about this solution.

John Bwarie: How’s it going?

Dr. Raphael Bostic: Or how’s it going, but more than that, here’s the toolkit to do what you need to do. Here’s the playbook.

John Bwarie: So you had been doing everything but the playbook. You had the conversation or [crosstalk 00:22:35]

Dr. Raphael Bostic: We may have had the playbook, but we just [crosstalk 00:22:37]

John Bwarie: The shelf.

Dr. Raphael Bostic: So we’re trying to be much more engaged and active, so we’re bolstering our team to have a number of outreach professionals who are expert at dealing with communities as they’re wrestling with issues. So some of those have actually worked in government before at the local level, at the county and state level. So they’re familiar with some of the challenges and those tension points that you’re going to have to fight through in order to get things rolling.

John Bwarie: So that’s under the community and economic development. I’m going to come back to these. What’s number five?

Dr. Raphael Bostic: Number five is just general outreach.

John Bwarie: General outreach.

Dr. Raphael Bostic: So as I go around, one of the things that I do, I give speeches on the state of the economy. I talk to businesses so I can understand what they’re seeing in terms of challenges and opportunities and what worries them. I talk to community members. I often go to universities or schools to talk about economics as a profession. I try to, in these visits, see something interesting, an interesting plant, so I’ve gone to a tire plant and seen how automation is being deployed. This outreach is actually very important for me to have a better sense of what’s happening.

John Bwarie: So this is … You’ve come from … Your trajectory was education to be an economist. You worked in the federal government. You worked at universities. Now you’re sort of taking all that experience and putting it into this very specialized role, because there’s only 12 of you.

Dr. Raphael Bostic: Only 12 of us, yes.

John Bwarie: I don’t know. Was this ever a job you thought, oh, I’m going to be a president seat of a fed?

Dr. Raphael Bostic: Never, never. No, my first job out of graduate before I got my PhD was at the board in D.C. But I didn’t think I would really have a long future there, and so I was there six years and then came to academia at the University of Southern California never thinking I would ever return back to the Fed family as it were. But it’s been a real pleasant surprise. I feel like I’ve grown into it well. It feels very comfortable. It’s been a lot of learning.

John Bwarie: So with all this work, you’re doing a lot of … I look at what you said. At least the Federal Reserve bank of Atlanta, you’ve got your policy and your regulation and your supervision, and then there’s this function of payments that’s [crosstalk 00:25:06]

Dr. Raphael Bostic: Right, and the retail payments we actually run out of Atlanta for the whole country. So that’s ours, so I have a bunch of folks that do that.

John Bwarie: So anybody that’s paying by credit card somebody at a retail restaurant or store-

Dr. Raphael Bostic: There’s a good chance they are going through that settlement that’s happening through our infrastructure.

John Bwarie: Then there’s this other … So I look at three buckets. You’ve got your internal operations, the hidden consumer-facing piece. They don’t see it, but you’re working with the people. Then you’ve got your engagement outreach community, economic development. How do you do it? I mean, let’s talk about this district. This district is huge. We talked about big cities, small hamlets, if you will, or towns. Like every part of the country, you have extreme wealth, and you have extreme poverty. Your job isn’t … Or is it about lifting everyone out of poverty? Is it about economic growth? Or is it about fair economics? Do you see the difference there?

Dr. Raphael Bostic: So here’s kind of how I think about it.

John Bwarie: How do you think about it?

Dr. Raphael Bostic: The Fed, we are stewards of the economy. We have two mandates. One is stable prices, and the idea there is that, if people are going to invest in something that’s going to take five years to finish, they want to have a good idea that they know what the price is going to be five years from now. If the prices are bouncing around a lot, then their confidence in that estimate is going to be lower. It means that that will make it less likely that they invest. So we want people to be able to do long-term planning, because that’s how you maintain productivity, increase it, do important investments so your company can function.

Dr. Raphael Bostic: The second mandate is maximum employment. What I say is I prefer maximum sustainable employment, because I don’t think we should be pushing it too hard and then-

John Bwarie: [crosstalk 00:27:09]

Dr. Raphael Bostic: … an economy overheat so that we have some kind of rebound in a bad direction. So I see our role as trying to accomplish both of those. Going to these communities is really, to my mind, more about the second of those functions. So if we want to maximize employment in a sustainable way, we need to make sure that there are opportunities that are available to anyone who wants to build skills or pursue something that is going to make them marketable in a labor market, either by producing or by being a worker or however they want to do it. So, for me, I see a lot of my going around the country to understand what the barriers are, to see where there’s potential, and to make sure that everybody is understanding the economy in the same way.

Dr. Raphael Bostic: One thing I’ve seen going around is that there’s not one US economy. If GDP growth is what, 2.5, 3 percent, in some neighborhoods, it’s actually 6 percent. So around where my bank is located, there are cranes all over the place, new buildings, offices going up. It’s growing really fast. There are some smaller towns that used to have factories that are now closed. It may be 0%. It kind of balances out to 3, but when you talk to them, when you see their experiences, for me to talk about, in one of these small places, the economy as if it’s 3%, they’re going to look at me like I’m crazy, like you’re out of touch. So we, last year for our annual report, talked about one district, many economies. The idea that for us to be maximally effective, we need to make sure that when we go talk to people, we’re talking to them where they are.

John Bwarie: Well, I mean, it’s the old adage in local politics, where I come from, all politics is local. It’s on the street corner. What matters to one neighborhood, even if you go just half a mile, a mile away-

Dr. Raphael Bostic: It could be totally different.

John Bwarie: … it could be totally different. The same is true if you look at your lens, when even just state by state you’re going to have different perspectives on economy. So you have to balance that. How do you balance that then? I mean, do you know how many people are in that district? I mean, millions.

Dr. Raphael Bostic: I [inaudible 00:29:31] millions.

John Bwarie: Millions, right?

Dr. Raphael Bostic: Millions of millions.

John Bwarie: [inaudible 00:29:34] I mean Florida is a huge state. New Orleans is a huge city. So how do you wrap your head around that? So you’re coming in from mostly … Your career has been Southern California, in D.C. as well. How do you come in and say, hey, I’m going to help you understand this economy? That’s my job. I’m going to help build sustainable employment and stabilize prices over here. But for our intents and purposes, how do you approach that? You show up three years ago. Hey, everybody, I’m here. They didn’t pick … The communities didn’t pick you. You were given to them. How do you start to build trust? Because you’re an outsider.

Dr. Raphael Bostic: So one of the things I’ve tried to do is leverage the relationships of my staff. So I’m the only one who’s a new person, and many of the folks in the field that work for the bank have been there for years. So when we do these visits, one of the things we try to do is give me opportunities to have smaller meetings, so not just the big luncheon talk for-

John Bwarie: The keynote speech.

Dr. Raphael Bostic: … 350 people. But we try to always do a business round table where we’ll get 8 to 12 business people, and we can have a much more person-to-person and direct conversation. We try to do the same thing with elected officials and community members. So in these trips, I’m actually trying to form relationships with people and also get them to understand that I’m committed to help them do the things they want to do. One of the things that I’ve been very sensitive to is the fact that locals don’t want people from some other place coming in and telling them what to do. They don’t want that, and I get that.

John Bwarie: So how do you help them? How do you show that you can help them?

Dr. Raphael Bostic: So we ask them what they want to do. We can have a conversation and say, well, we have seen in other places some of these things that you’re asking for. We know how it’s done. You can’t do this unless you have these other building blocks in place. So we should think about that. We try to shepherd a conversation that gets us to a place where we get some good ideas about what those first steps need to be or what those next steps need to be to accomplish them toward their goal.

John Bwarie: Let’s identify this. These are the next steps. How do you make sure you do it?

Dr. Raphael Bostic: So we don’t have that kind of oversight authority. So what we do, typically, is we might say, okay, for what you want to do, we don’t have that expertise in house, but we know six organizations that can do this. We give you their names. You call them, work with them, see where you can get to. But we really do see ourselves as a partner for locals, but not a replacement for locals. So if the locals … They have to decide they want to do it, the leadership. That could be public sector. It could be private sector. It could be nonprofits. Many places in my district, it’s a blend. The leadership is … The doers appear across all the sectors.

John Bwarie: That’s when you’re most successful, when you have that blend.

Dr. Raphael Bostic: Typically, typically. That seems that that’s kind of how it works. So we really try to make it easy for people, but if people don’t want to do it, we can’t make them do it. That’s our challenge.

John Bwarie: Can you give me a success story? Give me a specific that you saw people come together. You made the connection, and you did your job the best you could. You can’t tell them what to do. What was the outcome?

Dr. Raphael Bostic: Well-

John Bwarie: [crosstalk 00:33:25]

Dr. Raphael Bostic: So everything’s a process. But here’s an example. So one of the things that I had been working on here in Los Angeles … I was a professor before I took the job … was this intersection between health and economic development and the idea that, for people’s health, it’s often the case that the things that are keeping them from being healthy have nothing to do with the right health care. It has to do with other things, the quality of your housing. Is it drafty? Or does it have mold? Or stress because there’s crime on the streets or whatever it is. Those things are called social determinants of health. Typically, the funds used to address social determinants of health are not health care funds, right? So I’ve seen some estimates that would suggest that 80% of a person’s health is in the social determinants space. But if all the health money can only be used for the 20%, then you’re going to work extra hard to get those people healthy.

Dr. Raphael Bostic: So we have been working with a series of hospitals in Atlanta talking about this, and it’s been a multi-year process. Just not too long ago, seven hospitals signed a pact acknowledging that housing was an important aspect of health and that they were going to use resources towards housing. Now they still have to figure how they’re going to play out, but that they were willing to sign something publicly acknowledging an important reality, and we shepherded the meetings. So the thing happened at our bank, the sign happened at our bank. We had been involved in these conversations. That’s exactly the sort of thing that we want to do.

John Bwarie: That’s amazing. What’s the prediction? What does that look like in the future? Does it get replicated in other places? Does that group become … Do they actually build housing? What do you think? Look into your crystal ball.

Dr. Raphael Bostic: I have no idea. My guess is that they will establish some sort of fund that provides bridge financing for certain types of housing or certain stages of housing development or even certain types of rehab, because there’s a lot of existing housing. Then we’re going to try as much as possible to lift this up and convince as many other health care organizations to understand this and be willing to step up and do it.

John Bwarie: Do you stay involved, or do you basically launch them and then step back?

Dr. Raphael Bostic: Our goal is to launch them and then step back, because we don’t have hundreds of people. So if we catalyzed six projects and had to then man each of them or staff each of them, then every new project that we catalyze, we’d need to hire more people. So we’re trying to be a stimulus and then hope that it builds enough momentum that it can go on its own. My expectation is that, in the early stages, we’ll have to do some check ins, but that’s being a good partner and walking with people.

John Bwarie: The work with local mayors, local town council, city council, county leaders or leader … I mean, everybody’s got a different name for their local government. When you come in, those folks oftentimes don’t have training in economics. We see that across the country, that decisions about the future of cities are made by people without the formal training or even sometimes without advisors that have formal training. They’re making policies that last generations, whether it’s about zoning and what can be built or should be built or about what businesses should be incentivized to come in or not, or even what should be allowed or not. We’ve seen Southern California policies where certain types of businesses are excluded from certain neighborhoods for one reason or another. These are oftentimes policies that are not … They’re made with best intention.

John Bwarie: I don’t want to criticize the intention of any of our policymakers that are trying to help the economy, but without maybe the background to be able to make those decisions. It gets even worse when you look at your planning commissions or planning boards around local municipalities without the training. Do you see that? Because I’m not as familiar with your region as other parts of the country. Number two, can you overcome that roadblock of the lack of … not for lack of passion, interest or commitment to community, but just you studied for many years to be the expert in the economy that you are. How do we transfer that knowledge? You talked about that a little bit, but I’d like to hear your perspective on that and what you’re working on to address it.

Dr. Raphael Bostic: So I’ve been working on this for a long time. When I was a professor at USC, we had a training program for local electives. I used to teach a three-hour class on housing policy just to try to ground them … And these are the mayors, city council people, county commissioners, just try to ground them and give them a richer understand and appreciation for the issues. Almost all of them did not know hardly anything that we talked about, but they were open to learning and understanding more deeply those relationships. In my experience, oftentimes, people run for office at the local level because one or two things have pissed them off. They’re like, I’m tired of this. I’m going to run. I’m going to do something about it. Then they realize that that job is about more than just that one thing. So now they have to figure who they’ll listen to, and [inaudible 00:39:11]. So no one who runs or who’s president in these things, particularly in the early years they’re doing it, they’re not going to be an expert on everything they’re asked to have an opinion about or make a decision on.

Dr. Raphael Bostic: So one of the things that I think it’s very important that we continue to engage … And so we have lots of materials online. But I’m really excited about our new engagement effort and outreach, because we’re going to wind up touching a lot more people in an action-oriented way. My hope is that those positive experiences, though I’m very confident they’re going to work out well, will start to create a buzz. People will start talking about it and saying, oh, maybe we want to do that. Maybe we want to have people come in and bring them expertise and let us be better. Success breeds copycats, and I want as many copycats as possible. I want us to be successful and create an expectation that, if you engage with our institution, we can help you have conversations and deeper understanding about things than you would otherwise.

John Bwarie: Going back to your … One of my proudest moments … not my proudest, but one of them. You and I convened a panel … It’s got to be at least four years ago, on civic literacy, civic engagement, when you were head of the Bedrosian Center on Governance at the Sol Price Policy School at USC.

Dr. Raphael Bostic: Price School of Public Policy.

John Bwarie: Price School of Public Policy at the University of Southern California USC. So we’re talking about four or five year ago. We had this conversation, and the conversation was around what stops people from being engaged with their local decision makers. The question I previously asked you is sort of a top-down, like how do you influence decision makers. Do you have a role for educating the public to influence or be engaged in the future of the economy? Because, yes, you’ve got the small businesses. What about the consumer? There’s people who work for a business that are not in the decision making, whether the plant stays open or closes, where they spend their money. Is there a consumer-facing component to the work, recognizing millions and millions of people in your district? How does that work? How do you engage more just people to be aware and be a part of the solution for a maximized sustainable employment?

Dr. Raphael Bostic: So what we do … We do something that’s a little different from where you started. We try to make sure that consumers know where opportunities are emerging. So you take our economy today. There’s a lot of new technology that’s coming in. That technology is disrupting sectors. What’s happening is that a bunch of jobs that used to require people can be done with a fraction of the number of people before. But they’re also introducing, through this technology, opportunities for new jobs. So the question is, what are the skills? If you get disrupted, what should you do? How do you find gainful employment that pays a reasonable wage so that you don’t need to work four jobs? So we actually have something that we call an opportunity occupations monitor, which is a county level tool that says, in your county, these are the jobs that don’t require four years of training that you can get maybe a certification that will pay you a living wage.

Dr. Raphael Bostic: It’s being refined as we speak, but these are the sorts of things where we’re trying to put information in the hands of the people who are looking for that. Because if you’ve been disrupted out, you may have no idea what you could do to have that next chapter of your career. So we’re trying to get that word out, and we build tools like that fairly regularly. We try to put information in the hands of people so they are empowered to make decisions to move forward. That’s a little different than the engaging in the civic enterprise.

Dr. Raphael Bostic: To date, we have been reluctant to be too on-the-ground activist about political engagement. We’re happy … We want to work with the willing, and we’re not going to spend a lot of energy dragging a whole host of people out to the city council meeting. That’s really not our role. Our role is to be invited to the city council meeting and to be perhaps asked to talk about the research on housing or work force training or whatever, on the design of benefits. We can do that. Everyone gets to interpret how broad the mandate is and what sorts of activities fit under the umbrella of that mandate. To date, historically, the Fed has not viewed political engagement as falling neatly into that mandate. I think that it’s useful for us to have a pretty bright line on that, because we are nonpartisan as an institution. As soon as we start showing up and trying to do voter registration and all that kind of stuff-

John Bwarie: Well, and I’m not even pushing that far, just the idea that the more people that know about the economy and the way it works, the more they can be a part of it. I think that’s what you’re saying that you’re working on.

Dr. Raphael Bostic: That’s right. I totally agree with that for sure.

John Bwarie: And that people understand where they spend their money matters. In your region, they’re probably not spending out of your district if they’re living in your district, and so it’s keeping that macroeconomy going. But if you do all your entertainment and extra spends in other places, what does that mean for your community if no one’s spending it there? Just the basics of economy. Money coming in from the outside strengthens your local economy, versus just circulating what’s already there. Those are the kind of things that I think are maybe not as prominently aware in general society.

Dr. Raphael Bostic: Yeah, I think that’s a fair statement. I’m not sure. It’s an interesting question about where people spend their money. So if you buy something from Amazon, are you spending it locally? Or is that somewhere else? These questions are kind of blurring in a pretty significant way. These are the sorts of issues and questions we have to wrestle with and think about how the economy actually works.

John Bwarie: Now before we close, I want to ask you about the issues around equity, knowing how diverse your district is in terms of wealth and poverty. Do you have a role in that space? As we talk about equitable policies on a number of issues … The accessibility of jobs is an equity issue. Being able to get to them, transportation, becomes an equity issue. Almost everything could be an equity issue as you look at the civil society. Where do you see yourselves fitting in that conversation, understanding you’re not political, understanding that you’re nonpartisan? What’s that lens look like for you as a big picture look at the economy?

Dr. Raphael Bostic: So the way I think about it is this. If we’re going to get to maximum sustainable employment, we have to make sure every person can be maximally productive. To the extent that we have structures or social norms or institutions that are weak your unable to deliver services to people, that may not be true. That’s kind of the equity lens. We have these differences in the ability of particular institutions to provide you with real access opportunity. So we need to push back against those in the name of maximum employment. So that’s the Fed perspective. But it’s really the idea that the way that we get everyone to their full potential is by making sure the institutions are structured to facilitate that. If they’re not, then that’s a barrier that’s going to prevent us from getting to our maximum sustainable employment.

Dr. Raphael Bostic: I’ll say it like this. You could have institution today, whatever they are, and say maximum employment is 5 million. Or you could reform these institutions so that more people [inaudible 00:48:17] and maximum employment is 20 million. In either case, we would be fulfilling the maximum employment mandate. To me, 20 is better than 5-

John Bwarie: Than 5, yeah.

Dr. Raphael Bostic: … so let’s get to 20. Let’s at least not just accept the status quo. It’s interesting. I go around a lot. I never get pushback on the idea that we’re not getting maximum productivity out of every person in a community. People know that there’s variation in that, and people know that there are institutional barriers on that. That’s not been an area where I’ve gotten any pushback. In fact, it’s been helpful, because the locals hear that the Fed has the same aspirations for them that they do, that we understand where they are. We understand their challenges, and we want to walk with them. That’s a message that I’m trying to say loud and often so that people aren’t surprised, and that they know, if they want to try to do something, they can call us and have a reasonable expectation that we will take the call and work with them moving forward.

John Bwarie: You are a true community partner in that effort. I mean, it’s setting a standard, hopefully, that your 11 other colleagues are equally as ambitious [crosstalk 00:49:42]

Dr. Raphael Bostic: So what’s interesting, the 12 of us all really agree on this issue. I think if you look at a collective 12 presidents, we may not have had a previous 12 that are as committed to this issue than we have today. I’m just privileged to work with my colleagues on this. We will, together, learn things that will inform each of our efforts to help our places be better.

John Bwarie: Great. Well, Raphael, before we leave, before we end, I want to go to our lighting round of questions, a couple of questions here. Just whatever comes to mind, no need to explain, just answer the way that you would. Who is a leader who has influenced you and your work?

Dr. Raphael Bostic: I’d say President Obama.

John Bwarie: What book has changed the way you think about the role of community in your work?

Dr. Raphael Bostic: Citizen.

John Bwarie: What specialty food from Atlanta do you think would do really well here in Los Angeles?

Dr. Raphael Bostic: Lemon peppered chicken wings.

John Bwarie: What’s the first place you turn to for information when working with a new community?

Dr. Raphael Bostic: My staff.

John Bwarie: What advice would you give a 25-year-old you?

Dr. Raphael Bostic: Keep your eyes open, and keep your head down.

John Bwarie: What is the best career decision you ever made?

Dr. Raphael Bostic: To go to USC.

John Bwarie: Nice. So far, what has been your proudest professional moment?

Dr. Raphael Bostic: That’s a hard one. I could go a lot of different ways on this one. If I had to pick one, I would say today in my mind is helping to settle the Thompson case when I was at [HUD 00:51:42].

John Bwarie: Now [inaudible 00:51:44] for those who don’t know, explain … I didn’t ask for an explanation, but now I want an explanation.

Dr. Raphael Bostic: The Thompson case was a lawsuit that was filed against HUD and the city of Baltimore and the Baltimore Housing Authority. There was an allegation that the housing authority was concentrating all their voucher eligible units in high poverty neighborhoods. That was disadvantaging people. So that happened in the early 90s before I even got there. There was a consent decree. The administration that I came in with in 2009 decided they wanted to settle whatever was remaining. That one was the last one that they couldn’t do. So I got pulled in. There’s a whole story about that. But suffice it to say it was a lot of hard work. There were many ups and downs, and I wasn’t sure we were going to get there. But we figured out a way to do it, and I had to be a pain in the butt for a lot of people or to a lot of people, I guess. But we got to a good place, and that program is still going. I’m really pleased that we were able to accomplish that.

John Bwarie: That’s great. Well, thanks, Raphael. I really appreciate you spending time with us talking about your work in the southeast of this country, but also the work you’ve done across the country at HUD, when you were here at USC here in Southern California. We’re looking forward to what’s next with Dr. Raphael Bostic.

Dr. Raphael Bostic: [crosstalk 00:53:16] John, it’s great to see you as always. It’s really been a pleasure talking with you.