Richard Fisher prefers government to be minimal. If you look down there, thats the pavilion my family has given to the city in honour of my wife Nancy, he says pointing down from the 14th floor of the Federal Reserve Bank of Dallas to a building in the park below. That structure next to it, he says, moving his finger, is the Muse family theatre. Then, that building there, thats the Meyerson Symphony Hall given by Ross Perot. And the building behind it is the Wyly family theatre. We are a city of private money here in Dallas, he says, and his point is made. Fisher, who has been president of the Federal Reserve Bank of Dallas since 2005, made no bones about his feelings regarding minimal government during the credit crisis. No bank, in his opinion, should be bailed out by taxpayer money, no matter its size. In 2008 the Dallas Fed began beating the drum against too big to fail, and Fisher has tirelessly advocated rejection of TBTF in speeches, presentations and reports ever since. In the Dallas Feds 2012 annual report, Fisher wrote that Dodd-Frank had codified, rather than eradicated, the large banks TBTF status and included six essays on why TBTF had to end and a Q&A with Fisher himself on the topic included because of public demand and enquiry. What Fisher proposes in the Q&A and report is simple, he says unlike Dodd-Frank. They did what they could in the crucible of a crisis, but over 9,000 pages of regulation are too much. And now there is more concentrated power in fewer hands than before the crisis. Our proposal is so simple. Were not suggesting the complex bank holding companies should necessarily be broken up. Rather, the Dallas Fed, led by Fisher, is proposing three changes. That deposit insurance provided to bank holding companies is provided only to the commercial banking entity; that access to the Fed discount window is open only to the commercial banking entity; and that any transaction with any other part of the bank holding company be accompanied with a clear agreement between counterparties that it will never, ever be bailed out by government or the taxpayers. He elaborates on this in his Q&A: Depository institutions should have everything on their balance sheet so investors can appropriately gauge operations. Nontraditional banking and intermediation should be clearly separated so that there is no implicit subsidy. Any transaction with the holding company or shadow banking affiliates should be at arms length from the commercial banking institution. With proper transparency, the equity and debt providers will consider appropriate risks, funding costs will adjust and market discipline with help rein in excesses. Fisher says that it is not hard to find agreement from either political side that TBTF is an issue. No one wants to defend the powerful banks, he says, although the Democrats are requiring a little more persuasion. Its interesting given that Fisher has a Democrat party past. He was an assistant to the secretary of the Treasury during Jimmy Carters administration, was a Texas Democratic nominee for a US Senate seat in 1994 and served as deputy US trade representative for president Bill Clinton. He will not, though, discuss his politics in the context of the Dallas Fed. I am totally non-partisan in my role here, he says. So does he think his proposals will get through? There is noise of a Glass-Steagall 2.0 that is fashioned on what we suggested, and I think in October the argument on this will become more active. There is political momentum for sure, although some worry about getting it wrong. But Fisher also knows how politics and business work. The large financial companies and their proxies are spending millions of dollars to buy congressmen and congresswomen and protect their interests. You can quote me on that. We will see how that plays out. As part of his lobbying against TBTF, Fisher has also become the voice of the nations community banks and has become something of a hero among them. Five of the six essays in the annual report gave reasons why smaller banks have to be supported. They are the key to stability; in times of crisis they continue to lend, unlike their larger peers, yet are being squeezed out by the cost of doing business, the reports argue. It is the small banks who serve the small business that grow the economy and that buy the local state bonds, Fisher says. Yet the interest margins for these community and small retail banks have been hit hard by zero interest rates; they feel the playing field has been tilted to the large institutions and the money centres. He expects that playing field to even out, although further consolidation is inevitable. There wont be heavy concentration though no one wants that. We will still have several thousand banks in the US. Fisher, and indeed Texas in general, he points out, is a supporter of the smaller business which is somewhat surprising given the association of Texas with large oil corporations. We do not like concentrated power, he emphasizes several times. What we do like is amazing people leading their own businesses. He points to one local Dallas success story as an example. Allie Beth Allman and her firm made more than $1 billion in home real estate sales in Dallas last year. She put up a billboard: One woman, one office, one billion. This is great. Shes not running a corporation. Shes doing great in her small business.
So will Fisher move into local politics when his time is up? Not a chance, he says.