By Alister Bull
EL RENO, Okla., April 29 Federal Reserve officials, as a rule, can expect a tough crowd when they visit places like Oklahoma where suspicion of big government runs deep.
Esther George, president of the Kansas City Fed, is an exception. As she surveyed the cattle ranchers, energy bosses and other business leaders waiting to hear her speak at an event in El Reno, Oklahoma this month, she had a lot in common with her audience.
Like many of them, George has become troubled that the dramatic measures the Fed has taken to restore U.S. growth might fuel inflation and asset price bubbles.
Raised in a similar farm community in neighboring Missouri, George was picked for the job for her ability to speak for the heartland, and she proved with her first vote on monetary policy that she would have no hesitation in doing so.
At the Fed's first meeting of the year on Jan. 29-30, George dissented against a decision to buy $85 billion in bonds per month to push borrowing costs down. It was the first time in the Fed's 100-year history that a policymaker used their debut vote to dissent.
"She's got good Midwestern roots, a farm girl's common sense," said Dallas Fed chief Richard Fisher, who dissented against easy monetary policy twice in 2011. "Voices like Esther's prevent (the Fed) becoming locked into group-think."
The U.S. central bank has held benchmark interest rates near zero since December 2008 and has bought about $2.7 trillion in government and mortgage-related debt in a further effort to drive down borrowing costs and foster growth.
A dissent, even if it fails to halt the action supported by the majority of voting Fed policymakers, can exert a moderating influence as the central bank's chairman seeks to preserve a degree of consensus. With her vote, George became the flag-bearer for officials opposed to the Fed's easy money stance.
There are 12 regional Fed branches, each theoretically independent from the central bank's board in Washington. The presidents of 11 of these regional Fed banks rotate in and out of voting seats on the central bank's policy-setting panel, while the seven members of the Washington board and the head of the New York Fed enjoy permanent voting status. The system was designed so there would be some counter-balance to East Coast power centers to protect the interests of Middle America.
George has been president and CEO of the Kansas City Fed since October 2011, and in January she landed in a voting seat.
FROM FARM TO FED
Esther Lynn George was born on Jan. 15, 1958, in the cattle town of St. Joseph, Missouri and grew up on her family's farm in a small community called Faucett, a few miles to the south.
She earned a bachelor's degree in business administration from Missouri Western State University in St. Joseph, and an MBA from the University of Missouri-Kansas City. She also graduated from non-degree programs at the American Bankers Association Stonier Graduate School of Banking and the Stanford University Executive Program.
She joined the Fed in 1982 after a couple of years in the private sector, and has never looked back, winning a series of promotions in the male-dominated institution and eventually rising to become the Kansas City Fed's top bank regulator and then its first vice president, the bank's No. 2 post. She took over the presidency on Oct. 1, 2011.
"She is a great listener," said Julie Stackhouse, head of banking supervision at the St. Louis Fed, who worked with George for 15 years in Kansas City and is still close. "She is able to bring together individuals who sometimes have differences of views simply by being in the mix of the discussion."
Described as warm, likeable and down to earth in numerous interviews with current and former Fed officials and others who know her, George, who declined to be interviewed for this article, has also shown a tough side in delivering plenty of bad news to banks over the years.
Hundreds of banks were closed or needed help in the Kansas City Fed's district during the savings and loans crisis of the 1980s and 90s. George carried a briefcase filled with padlocks and chains to some banks so she could lock up filing cabinets to secure loan documents pledged as collateral to the Fed.
Bob Regnier, president of the Bank of Blue Valley in Kansas City, who has known her for more than 25 years, said her fair, straightforward manner had won her respect.
"She will bring additional viewpoints and additional ideas to the table. She's a very strong leader," he said.
Thomas Hoenig, George's predecessor at the Kansas City Fed and now a top bank regulator in Washington, said George brings "intellectual integrity" and balance to the job.
"People are concerned that the Federal Reserve isn't broadly enough represented in terms of the country, and in terms of input from across the country," said Hoenig, who dissented at every FOMC meeting in 2010 out of concern Fed policy was too easy.
People involved in the selection process for the Fed regional presidency say George's local roots and Midwestern values of common sense and hands-on experience are what got her the job in the first place.
Terry Moore, president of the Omaha, Nebraska branch of the AFL-CIO labor organization, chaired the committee the board of the Kansas City Fed established to find a successor to Hoenig. Moore said there was clear pressure from the Fed in Washington to install a PhD-trained economist in the position, but George "smoked" those other candidates in the interviews.
"Esther is a practical, articulate spokeswoman for what goes on back here," said Mark Gordon, Wyoming state treasurer and another search committee member.
Gordon rejected the suggestion they had simply sought another anti-inflation hawk in Hoenig's mold. "I think it was more sense vs theory," he said, adding: "I just wish we had a bit more of (that) in Washington."
Although the Fed has tried to explain that its policies aim to help Main Street, not Wall Street, it has become a persistent target for Tea Party fiscal conservatives incensed at its involvement in Wall Street bailouts. That is certainly true in George's Fed district, which comprises Wyoming, Nebraska, Colorado, Kansas, Oklahoma and parts of New Mexico and Missouri.
ON THE ROAD
George renewed her opposition to the Fed's quantitive easing policy in March and can be expected to dissent again when the Fed's next meeting wraps up on Wednesday.
George has also taken her message on the road to reassure critics in her Midwestern district that she understands their alarm and is speaking up for them in Washington.
While America is still recovering from a deep recession, with the unemployment rate at a lofty 7.6 percent, this part of the country is doing relatively well.
Oklahoma's jobless rate stands at 5.0 percent, the eighth lowest in the United States, and land prices are soaring thanks to strong demand for the oil and agricultural commodities the state produces, not to mention the low interest rates that the Fed has engineered.
On the day before the April 4 Oklahoma speech, George bumped along muddy dirt tracks to visit a gas processing plant, and sampled El Reno's local delicacy - onion burgers - at Sid's, a popular diner. Along the way, she heard plenty from a community wary of decisions taken back East, and she made plain in her speech where she stood.
"I view the current policies as overly accommodative, causing distortions and posing risks to financial stability and long-term inflation expectations with the potential to compromise future growth," she told the 100-odd guests over a hearty beef-and-potatoes lunch.