No glamour, no apologies

The former number two at the Fed has found no shortage of excitement in the nitty-gritty, writes Francesco Guerrera in an interview which appeared in the July 26, 2010 issue of the Financial Times.

Roger Ferguson
Chief executive, TIAA-Cref

Many business and political leaders muse about being alone at the top. Roger Ferguson actually knows what it feels like.

On September 11 2001, Mr Ferguson, then number two at the US Federal Reserve, was working in his Washington office when he received a call from his wife, a senior official at the Securities and Exchange Commission.

"She told me to turn on the TV," says Mr Ferguson, now chief executive of the pension fund TIAA-Cref. "Something had happened and one of the World Trade Center towers was on fire. I saw the second plane crash."

Thus began the most difficult day in the 58-year-old's life. Unable to contact his boss, Alan Greenspan, who was in Europe, and other Fed governors, the softly spoken former management consultant was charged with crafting the central bank's response to the al-Qaeda attacks.

As he gazed out of the window at the plumes of smoke coming out of the third aircraft, which had crashed near the Pentagon, Mr Ferguson realised the magnitude of the task.

"I was the ultimate decision-maker at the Fed," he says, recalling how his first move was to keep the US financial system open. "We also decided against declaring a national banking holiday, which would have been, I think, quite disastrous."

For Mr Ferguson, though, the most important decision was to stay put rather than following other government agencies in evacuating their buildings - a call that turned the Fed into a communication hub for other parts of the government.

"The thought of having the vice-chairman and senior staff of the Fed trooping around in Washington being out of touch wasn't a good one," he says, without a hint of the emotions he must have felt during those momentous hours.

That object lesson in crisis management proved useful at TIAA-Cref, a not-for-profit fund that manages $426bn (€330bn, £276bn) in assets on behalf of 3.7m teachers, doctors and academic professionals, during the financial turmoil of 2008.

As befits a former consultant, Mr Ferguson lists the lessons learnt from September 11 in three points. "One is that knowing how the financial system works enabled us to know where weak points were likely to be, and what we would have to do to shore up things," he says.

"Another thing is to exude a certain degree of calm: both the substance and style of decision-making are important.

"The other thing that I saw is that communication is critically important. During the market meltdown in 2008, one of the first things that we here at TIAA-Cref did was to talk with our institutional clients. We assured them about our financial stability, and talked with them about what we were seeing. We also kept our offices open on weekends, so that individual customers could get information and be reassured."

On points one - knowledge of the financial nitty-gritty - and two - calm under pressure - Mr Ferguson is a natural. Long a student of the unglitzy parts of the corporate world - his PhD thesis was on joint ventures - Mr Ferguson became an expert on the "plumbing" of the financial system during his eight years at the Fed.

While at the central bank, he marshalled a task force assessing implications of the Year 2000 date change, the so-called millennium bug, and quickly gained a reputation as the "chief operating officer" of the organisation.

It was this technical knowledge and competence that endeared him to Mr Greenspan - a man with whom he shared neither a political party (Mr Ferguson is a well-connected Democrat, Mr Greenspan, a lifelong Republican) nor economic ideology (Mr Ferguson's most powerful influences are from students of market imperfections such as George Akerlof and Michael Spence, while Mr Greenspan was, until recently, an ardent believer in laisser-faire capitalism).

Mr Ferguson, who missed out on succeeding Mr Greenspan in part because of his political leanings, makes no apology for his interest in the less-exciting parts of finance.

"It's incredibly important to understand the less sexy, less glamorous parts of the business because modern financial services are accident prone," he says. "The only way to minimise the probability of accidents or minimise their impact when they occur, as they inevitably will, is to know how the system itself functions."

At first sight, Mr Ferguson's passion for the inner workings of the system and cerebral demeanour make him look more like one of the many lecturers whom TIAA-Cref looks after rather than a CEO who oversees thousands of people and billions of dollars worth of investments. But closer scrutiny reveals that while he is the antithesis of the larger-than-life business leader, he is driven by a pragmatism and sense of social duty that eschew the theorising of academia.

"This job pulled together three or four areas of interest that I've had for a long time," he says, explaining his decision to take the role at TIAA-Cref more than two years ago. "One is investments, markets and asset management. Another is my interest in the non-profit sector in general and higher education in particular. The third is that TIAA-Cref is a mission-driven organisation. Almost all the places where I've worked in both the private and public sectors pride themselves on a certain kind of mission."

Mr Ferguson inherited his interest in markets from his father, a government cartographer who was an avid investor, while his mother, a teacher, instilled in him respect for the education system.

His passion for public service came from growing up as a black middle class boy in a segregated Washington DC during the 1960s. While other teenagers were dancing to The Beatles and watching Bonanza , Mr Ferguson got hooked on the Federal Reserve.

"In 1966, Lyndon Johnson appointed the first black governor to the Fed, a man named Andrew Brimmer," he recalls. "The Brimmer appointment captured my imagination. The Fed became very interesting."
The move showed Mr Ferguson that race was not a barrier to achievement, in spite of daily reminders of the unfairness of segregation.

"There was a local amusement park that was owned by Montgomery County and blacks could not go to that amusement park," he recalls. "We went for one week every summer to a place on the Jersey shore: whites were allowed [to rent houses] in the first eight blocks closest to the beach and blacks were in the second eight blocks further away from the beach . . . It's not like I had a deeply oppressed background. That's simply not true. But there was segregation and things that blacks couldn't do when I was growing up."

Nevertheless Mr Ferguson maintains that, on balance, race did not impede his professional development, partly because of the positive discrimination movement that sprang up as a reaction to the long decades of segregation.

"I've lived in a little bit of the arc of history from a time when being black was to be disadvantaged to a point where being a qualified minority person was encouraged and helped," he says. "I'm absolutely sure that there are people who, at some points in my career, wouldn't give me a chance. On the other hand, I am in that generation of blacks who got the advantage of integration at a point when qualified minorities were a group to be helped not a group to be hindered."

Having reached the top of the corporate ladder, Mr Ferguson's priorities are twofold. First, modernising TIAA-Cref - an organisation that is prone to inefficiencies and ponderous decision-making - by cutting costs and working with more customers and increasing its relationship with existing ones. Second, the Democrat is using his impeccable links to the ruling elite - he is close to President Barack Obama - to push for wholesale reform of a retirement system that is both expensive and ineffective.

Once again, he sees his task as operating at the confluence of private enterprise and public needs. "One of, if not the largest, remaining social issue in the country is securing safe and secure retirement for hundreds of millions of Americans," he says. "It's a nice overlap between my public policy interest and my professional job."

The CV

Born: October 28 1951 in Washington DC

Education: Bachelor of Arts in economics magna cum laude in 1973, a juris doctorate cum laude in 1979 and a PhD in economics in 1981, all from Harvard University

Career: 1973-74 Frank Know Fellow at Pembroke College, Cambridge University

1981-84 Lawyer at Davis, Polk & Wardwell

1984-97 Associate and partner at McKinsey & Company

1997-2006 Joined US Federal Reserve as a governor

1999-2006 Vice-chairman of the Federal Reserve

2006-2008 Head of financial services at Swiss Re, chairman of Swiss Re America Holding Corporation and a member of its executive committee

Since 2008 President and chief executive of TIAA-Cref

Interests: collecting prints of abstract art