Saturday, May 15, 2010

The Fortunes of the Fed

Joel is intrigued by the financial disclosure form of Janet Yellen, the incoming Federal Reserve Board Vice-Chair, though I am not certain whether he is more impressed by the fact that she may be worth $8.5 million than that Chairman Ben Bernanke may be worth less than a million (link).

The Bernanke number is interesting, though he may be part of a great tradition. By my recollection Paul Volcker, the Uber-Fed, was not remotely wealthy until, at least, he left the chairmanship. Nor, I think, Ben Strong, the architect of the Federal Reserve system: as I recall, his prospective father-in-law was scandalized that his daughter ws marrying a mere government clerk (he was President of the New York Fed). Some guys just seem to have a thing for sound money.

Re Yellen, three things. One, I bet her balance sheet does not include the discounted present value of her University of California pension--considering that she is reporting jointly with her husband, another famous UC Berkeley econ prof, that is worth another $2-4 millon easy. Second, I wonder whether it catches all her discretionary tax-deferred pension funds--403(b)s and such. From Bloomberg I get the impression that maybe it does, and I should hope so. Humble English professors at Poduink U can easily have a couple of mill in their TIAA-Cref if their lives are sufficiently prudent or boring, and I suspect she could have done no less well. But third, the number apparently does not include her primary residence, which, given that she is at Berkeley, is probably worth a fair chunk of change.

Bloomberg adds a neat bit of context:

The number of U.S. households with a net worth of at least $1 million, excluding primary residences, increased 16 percent to 7.8 million last year after a 27 percent drop in 2008, according to the Spectrem Group, a Chicago-based consultant. The median U.S. family’s net worth was about $120,000 in 2007, according to a triennial Fed survey.

I should add that I am not particularly scandalized that all members of the Fed are millionaires. Considering that their primary job is to preserve the integrity of the money supply, I'm glad they all have skin in the game (I am intrigued that they seem to have a taste for inflation-protected securities--should that be telling us something?). Indeed, the real concern may be that as millionaires go, they are all pretty minor league.

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