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<font size="5">Taking a Hit</font>

<font size="4">Negative Wealth Comes Knocking at the Fed</font>

In 2001, the nation's top economic policymakers saw their personal finances suffer from the erosion of asset values that dragged down household net worth for a second consecutive year. According to recently released financial disclosure statements, the three veteran members of the Federal Reserve's Board of Governors all experienced notable year-over-year declines in the value of their financial holdings and in the income produced by those holdings. The financial disclosures filed by Fed governors and other highranking government officials report the value of each income-producing asset in their portfolio within 11 broad ranges described by a lower bound and upper band (for example 1,001 to $15,000), not specific amounts. The reports generally do not list non-income producing assets, such as homes, owned by the governors or their family members. Despite their lack of specificity and completeness, the disclosures still provide a fascinating look at the financial lives of America's most powerful economic policymakers.

For example:
<ul> ~ During 2001, Governors Alan Greenspan, Roger Ferguson and Edward Gramlich saw the value of their families' aggregate reported assets fall to $9.0 million-$25.7 million from $9.3 million-$29.8 million in 2000. The 3.3 percent (lower bound) to 13.6 percent (upper band) decline compares to a 4.7 percent diminution in the aggregate value of all U.S. households' financial assets during 2001.

~ Meanwhile, the three governors experienced an even more dramatic drop in the income produced by their assets. In 2001, Greenspan, Ferguson and Gramlich saw their families' combined non-salary income plummet to $360,482- $819,800 from $504,953- $2,267,745 in 2000. As many observers have noted, Americans grew increasingly exposed to asset-price movements as equities and other non-tangible assets gradually came to dominate household balance sheets in the late 1990s. With the 28.7 percent-63.8 percent drop in their families' aggregate non-salary income, the three governors became poster children for this heightened vulnerability.

~ The two new governors who took office in December 2001 stand at opposite ends of the Board's personal wealth spectrum. Due to a provision in federal financial disclosure standards, Governors Susan Bies and Mark Olson were not required to update the reports they filed upon their formal nomination to the Board as part of the current reporting cycle. However, the disclosures filed in August 2001 show Governor Bies to be one of the wealthiest individuals to serve at the Fed in many years. The family holdings of $7.5 million-$30.5 million she disclosed far exceed the asset totals reported in recent years by former Governor Edward Kelley, who reigned as the richest member of the Board until his resignation last December. Governor Bies' largest holdings consisted of stock in and options and deferred compensation from First Tennessee Corporation, the Memphis-based bank where she worked as a senior executive before her appointment to the Board. (In order to comply with prohibitions on governors owning positions in Fedregulated firms, Governor Bies began selling off her First Tennessee holdings in September 2001.)

~ While revealing comparatively modest holdings of $946,019- $2.2 million, Governor Olson's disclosure report also reflected a process of wealth accumulation resulting largely from long-term tenure with a single employer in the financial services industry. Of the assets reported by Governor Olson, 85 percent at the upper-band total and 78 percent at the lower bound consist of 401(k) and savings-account holdings he amassed during his career at the Washington office of Ernst & Young, where he advised financial firms on regulatory issues.

~ Despite the drop-off in their portfolios, the Fed governors remain in the higher regions of America's wealth distribution, with each worth well over $1 million (unquantified defined benefit pension assets clearly place Gov. Olson in this category). But the two newest governors both bring something to the Board's collective financial disclosure report that it hasn't contained in recent years: liabilities. Governors Greenspan, Ferguson and Gramlich have remained debtfree while steering the U.S. economy through one of the greatest borrowing sprees in history. However, Governor Bies reported two personal loans totaling $200,002- $500,000 due in 2002 and Governor Olson reported a boat loan worth $10,001-$15,000 due in 2013.

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Quelle: Financial Markets Center

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