By Paul Rowady, Director of Research at Alphacution Research Conservatory
Me and Yellen: Catalyst for the Next Rate Decision
< This is a test. This station is conducting a test of the Emergency Broadcast System. This is only a test.>
I had been in this room before.
It was the early post-Dodd Frank days. Maybe February 2012. I had authored a study on the impacts of new regulations on collateral and initial margin requirements for OTC derivatives (OTCDs). The study had been commissioned and was being promoted by the World Federation of Exchanges (WFE). Largely as a result of my global initial margin estimate of US$ 2 trillion for OTCDs, it had made a big splash. On the back of this, the event invites and media came knocking. My friend, John McPartland – “McP” to those who knew him longer than 15 minutes – invited me to present at a monthly luncheon for Chicago financial muckety-mucks.
Now, it was good to be back.
For this night’s event - set at the corner of LaSalle and Jackson in the main gathering space on the 2nd floor of the Chicago Fed – the room was host to the region’s annual director’s dinner. On this night, during a beautiful late spring evening in 2015, I would be far from center stage - sitting at the equivalent of the kid’s table at one of the far flanks of the room.
It had turned out that a former colleague and dear friend was working for one of the senior-most executives at the Chicago Fed and who was also responsible for much of the event preparations: “Would you like to join as my guest? Chair Yellen will be there as our keynote.” How could I refuse? A hot date at the Fed – and a chance to meet the world’s 7th most powerful person, according to Forbes’ latest rankings.
Honestly, I don’t remember much of what was discussed. Meeting Janet Yellen during a crowded pre-dinner cocktail reception only left the impression that this Yoda-like character – both in stature and “force” – must be the product of a George Lucas-John Stewart late-night writing session. That said, she was incredibly gracious to a guy from Detroit, particularly given the throngs of adoring employees towering around her.
Then, after we had cycled through the courses of fine food and fine Fed China, came the main event: The Chair’s keynote speech (including some Q&A). Here, again, the memory is foggy about the contents of the speech. Its style was surprisingly Greenspan-esque, just like on TV during official testimony (i.e. – entirely sanitized of information). Its circuitous logic caused me vertigo. I found myself seeking refuge in the tiramisu staring back at me, a bit uncomfortable that I was only hearing the wah wahs of Charlie Brown’s adult voices.
Until this, during the back and forth of Q&A: (Laughter around the room…) “We don’t remember how to raise interest rates. None of us worked here the last time we did it.”
< …This is only a test. If this had been an actual emergency, the attention signal you just heard would have been followed by official information, new, or instruction… >