Federal Reserve President speaks to College

The president of the Federal Reserve of Richmond spoke at C of C on March 27.

Jeffrey Lacker spoke to an audience of business and economics students and faculty about the current credit market relating to father of modern economics Adam Smith.

The event is part of a movement by faculty to help educate students on the financial market.

Economics and finance assistant professor Peter Calcagno arranged the event, serving as a member of the Initiative for Public Choice and Market Process (IPCMP). The faculty-based group’s mission is to advance understanding of a free and moral society, and it has been supporting events like this since its inception in the fall.

IPCMP hosted a week full of speakers and events about free market economics and its alternatives to honor Adam Smith Week including student debates and video presentations.

Adam Smith is best known for his philosophy that the market is self-regulating and everything is driven by self-interest.

Lacker spoke during assistant professor Douglas Walker’s morning Economics 101 class time in the Wachovia Auditorium. Economics students were joined by other business students looking for extra credit and a few looking for answers to their financial woes.

“We are obviously in a fiscal crisis right now and he is a significant figure,” senior Neil Alger said of Lacker’s appearance. “Sure it’s not the venue to say anything new or important, but it will be good to hear firsthand what he has to say.”

Lacker connected the basics of the credit market to Adam Smith.

He discussed his passion for finance, saying economic policy may have more to do with public wellbeing than a policeman on the streets. Lacker explained the uncertainty involved in understanding the credit market and what standards he feels should be upheld.

The question and answer session led to some insight on the current financial situation. Lacker explained in answering a student question that when the demand for housing peaked, an oversupply occurred and contributed to a bust.

Lacker said the market failure went too far and Fannie Mae, Freddie Mac and even Citigroup believed they were too big for government regulators to let fail. The feeling of immunity exacerbated risk taking, something Lacker called a moral hazard. Confirming the belief, the government rescued these companies.

While certain aspects of the event would fly over most non-economic heads, Lacker was generally able to speak to the crowd. “He brought the information down to a level I could understand,” sophomore Ellen Sandy said. “It was really informative.”

As for those who could follow the technical aspects, as Professor Heather Tierney said, “He was very diplomatic.”