How I Got My Career in Foreign Policy: Roger W. Ferguson Jr.

Roger W. Ferguson Jr. knew from a young age that he wanted to be an economist. Inspired by the first Black governor of the Federal Reserve, he studied both law and economics before his career took him to McKinsey & Company, the Federal Reserve, and the financial services firm TIAA. Over the course of his career, he helped steer some of the country’s largest financial institutions through the turmoil of 9/11 and the 2008–09 financial crisis. Now, he is a distinguished fellow at the Council on Foreign Relations. Read more on what lessons he learned about leadership during a time of crisis, why understanding economics is crucial to foreign policy, and why he and his wife will soon be driving sheep across London Bridge.

To kick off, what did you want to be when you were little? 

I’m going to surprise you, because when I was very, very little, like everybody else, I wanted to—I think I wanted to be a postman or something like that, right? But when I was fourteen, I actually decided I wanted to be an economist. It’s a little unusual—I don’t think most fourteen-year-old guys from Washington, DC, want to be economists. But that was because my father was very interested in banks and interest rates, and when I was fourteen, President Lyndon B. Johnson nominated Andrew Brimmer to be the first Black governor of the Federal Reserve. And that got me very excited about being an economist. 

So how did you make your way to law? Because I understand you started off in law.

I went to college, I majored in economics, and as I was thinking about what to do for graduate school, one of my mentors—a woman who was an associate professor then at the school—said that, you know, there’s this new thing starting to emerge, and a few people were combining law and economics. To me, that seemed like a good idea. It allowed me to have the potential to be in a policy framework, because most people getting PhDs wanted to be academics. Trying to figure out how to leverage my interest in economics, but more toward policy and government work—a law degree seemed like a good addition. And then, as you observed, once I had a law degree, I decided I had to practice law for a little while.

So what kind of law did you actually study, or was it a new discipline? 

No, no. So traditional corporate law, securities law, that kind of thing. And at that moment, there was a beginning of this field called law and economics, which basically brought economic thinking to legal problems, and sort of vice versa, had economists analyzing legal issues. So that’s how it all just sort of came together.

Did you always have an interest in international economics and foreign policy, or did you sort of discover that later and start in the domestic sphere?

So my undergraduate thesis actually was on Chile and the policies of President Salvador Allende. So I had a moment early in my professional economic career when international issues were top of mind, but as I got to graduate school and became a more serious economist, my focus turned much more toward domestic issues—some of them including monetary policy, which ended up being important to me, but some of them in this field I describe as law and economics around corporations and how firms work, and that kind of thing. So I’ve always had many different interests, but getting to foreign policy was later rather than earlier in my career.

So you started off in law and then you went to McKinsey, where you were for more than a decade. Is there anything that surprised you about moving from a law firm to a financial firm? 

Yeah, so the reason I left the law firm was that I liked client service kind of work, but I wanted to be closer to the business strategy that drove these legal deals—these mergers, these acquisitions, these public offerings. And so when I went to McKinsey, it was still similar in that it was very much a client service activity, high professional standards, client interest first, but the range of problems was much broader. More the kinds of problems that a CEO would directly worry about, in terms of profitability or market share or big strategic moves. So in that sense, it was very familiar and it was a very smooth transition. Fortunately, it was really just a great location for me to be at McKinsey & Company.

How did the opportunity to become—this is a mouthful—Vice Chairman of the Board of Governors of the Federal Reserve come about?

It is a mouthful, isn’t it? Remember, I told you I had a PhD in economics. One of the things I was interested in was monetary policy. I didn’t have formal classroom training in that, but one of my mentors was a professor of money and banking, and so I would have conversations with him about those topics. He was a guy named Ben Friedman. 

So that helped, but more directly, what helped was that my professor for entry-level graduate macroeconomics was a freshly minted PhD from Yale’s economics department, a young woman economist named Janet Yellen. One of my classmates in that class with Professor Yellen was another first-year graduate student at Harvard, a young man named Larry Summers. So I had known Larry and Janet from literally 1978, ‘77, when I first started. And they were both involved in the selection of the next governor for the Federal Reserve at the point when I was coming along, in 1997. I made it clear to Larry Summers that the role I would like, if any, in Washington, DC, at that point, would be at the Federal Reserve. And so that kicked off the whole formal process of being interviewed and going through that background checking—all the things you have to do.

Incredibly small world, fascinating. I’m sure throughout your career up until that point, you’d studied, you’d observed, you’d participated in crisis responses, but of course, you were the only governor of the Federal Reserve in DC at the time of 9/11—you helped lead the response to the attacks. What did that teach you about weathering crises that maybe you didn’t expect or hadn’t learned before?

It taught me four things about leadership during a time of crisis. One was—and these sound obvious and prosaic, but to see them in action during a horrific crisis is very compelling. So one of them is that you really have to have expertise. A crisis is not a moment for amateurs to lead. And sometimes that expertise can be pretty technical, and sometimes it can be broader and more generic. So it’s very interesting. On that day—I hadn’t thought much about this until recently, when someone interviewed me—it turns out that the very first call I made, roughly twenty minutes or so into the crisis—so after the second jet hit the second tower—was to a woman who ran one of the more technical parts of the Fed, which is the payment system. And the knowledge that the payment system was the thing that we had to worry about most was the result of technical knowledge and expertise that I had on my part, and then obviously she knew how to execute. So expertise is item one.

Item two is, you have to be able to synthesize and communicate very clearly what the strategic imperative is during the course of the crisis. I made it pretty clear that the strategic imperative for the Fed was to use all our tools to keep the financial markets and financial system functioning. We couldn’t keep all the markets open because of the nature of the attack in New York, but we used our tools to keep the financial system functioning, and it was just clear from top-to-bottom what people were supposed to do, because we had that very simple communication that clarified the primary objective.

The third thing that I learned during that was, not surprisingly, how important fortitude is. People don’t want to see their leaders being the first ones to panic. 

And then the last—which has become, again, a little trite, a little bit of a cliché, maybe overused—was empathy. The people in New York were obviously going through a very traumatic moment. People in Washington were going through a moment of great anxiety. I couldn’t force anyone to stay in the building. And the main thing was to realize that people were working through—as I was personally—both their professional issues, responsibilities, and also their personal ones. And just be mindful of the fact that during a crisis, it’s not just an institutional crisis, but it can also be a very personal crisis, and it’s important for people to know that you understand that.

So those are the four things: expertise; simple, clear communication of strategic imperative; obviously fortitude; and I’d say almost, maybe surprisingly, empathy.

However, you’ve weathered two major national crises; you then went to TIAA [Teachers Insurance and Annuity Association], where you helped weather the financial crisis. Do you feel those lessons carried over or were there new ones? 

No, they really were the same lessons. So at TIAA—I joined, as you say, in mid-April 2008—I had come from a place that already had some losses due to subprime loans. So I had a sense that maybe there was a bigger problem growing, but the same four lessons mattered, right? I had to have expertise in knowing what was in the TIAA portfolio, how we could de-risk it as best we could. There had to be clarity of communication about what goal we wanted to achieve. And the board asked me very specifically to lay out the three or four things that were going to guide my decisions, so being able to articulate that to the board and to the company was very simple. Obviously, fortitude—you know, you’re going to get through this, et cetera. But also, you have to recognize that you’re leading... The leader can’t do everything in a crisis. They’re working with and through team members who are all having their own special moments. People had to worry about their own mortgages. Some folks, I’m sure, during the course of that, had people who maybe were out of work or whose work was at risk. So, you know, really, those same four lessons seemed to me still relevant, even in this very different kind of crisis.

Circling back, I’m curious, what was the appeal of going from the Fed to TIAA? To move to such a big private company?

So the appeal was, I definitely wanted to stay in financial services. Because I had been a bank regulator, I didn’t want to appear to be involved in a revolving door, where I went from being a bank regulator to being a bank leader. My wife was a Securities and Exchange Commission commissioner at the time, and so obviously I didn’t want to go to work at a brokerage firm, because she was responsible for regulating brokerage firms. So that left me focused on asset management and insurance, which are two industries I loved anyway. 

It turned out that TIAA was the best fit for me because it also had this very important mission around providing financial security for people in the not-for-profit sectors in the United States—very complicated insurance products that they deal with, called annuities—and importantly, dealt with major social issues that we’re still confronting, which is creating retirement security for middle-income Americans. So it was just a wonderful fit from my standpoint: very much in financial services, very much sophisticated investing, and at the same time, this very important mission for people in the higher education, research, cultural, and medical fields.

Because you’ve dealt with these different crises at different points of your career, I’m curious what that taught you about America’s role in the financial system or the international dimension of domestic policy decisions?

Well, it was very interesting particularly on 9/11, because I came to realize something that I knew, but to have it be made so tangible—the important role of the dollar as reserve currency. We’ve always known in an abstract sense, of course, the dollar is the reserve currency status in the world. We understand that, it’s been much talked about, been taught for long periods of time, literally since the end of the Second World War.

But it was really relevant on 9/11 because the Fed had to, for the first time, initiate swap lines—swapping U.S. dollars for foreign currency with a number of central banks because the banks in those countries—think Canada, the UK, Japan, Western Europe—needed dollar liquidity to fund their operations. And that’s the ultimate definition of reserve currency: the U.S. dollar, at a moment of stress in the financial system, is something that we have to provide liquidity in U.S. dollar terms to the rest of the world.

And so it’s a very interesting real-world experience of what it is to be in charge of the reserve currency. We were the central bank because everyone came knocking on the door saying, “Can you lend us some dollars so that our systems keep working?” That’s exactly what was going on. The Central Bank of Canada, the Bank of England, the Bank of Japan, and the European Central Bank all wanted to borrow dollars from the United States. It’s called swaps, but essentially it’s borrowing dollars from the United States so they could put those dollars into their banking system, because those banks needed dollars to keep their operations running.

So it’s the prime example of what a reserve currency looks like and how important it is during a moment of crisis. So we had to do this pretty unusual activity of lending dollars to other central banks.

Zooming out a little bit—you’ve worked in government, you’ve worked in the private sector. For young people right now who are looking to carve out a career in foreign policy, what’s your pitch to them about the value of gaining experience in economics or finance?

Well, in some sense, I’m the wrong person to ask that question, because I almost learned it at the dining room table, so to speak.

So the big pitch, ultimately, is—we live basically in a capitalist society. It’s been accepted as the way that economics is organized, literally around the world, since the fall of the Berlin Wall in 1989. And there are different flavors of capitalism, right? We have what we have. Western Europe has a slightly different version. Japan has a different version. China has a version of capitalism. Russia has a version of capitalism. India. But nevertheless, we have a free market with different degrees of regulation.

And so, you want to study economics because economics is the study of markets. Economics is really the study of how a capitalist-type society works. There are other kinds of economics that have been studied, right? In Eastern Europe, there was Soviet economics, but now that’s all dead.

I also think international relations, foreign policy—whatever you want to call it—is a very exciting professional opportunity now because there are so many different dimensions to it. So there’s economics, there’s national security. There are softer forms of international activities; they’re obviously sometimes under threat and sometimes not. But you know, the role of the United States—as I still think it will be the dominant player for generations to come—I think it makes a lot of sense for young people, who have that bent, to be engaged.

And the final thing, I must say, whenever I do anything international, it gives me a very different view on how people see the United States. Simple things, like traveling, but more importantly, living in other places. I occasionally have taught at Cambridge University in England. All of them give me a better understanding or a different window into the United States.

That’s, to me, a great gift, of being able to do work in a global context, because you recognize how this country looks to other people. One may agree or disagree with how the people see it, but it’s eye-opening to talk to people who are, for very good reasons, excited to come to the United States, and other people, for other reasons, are concerned about coming. And just how they see the United States is an interesting lens for us to look at the country.

When you look back now, what role did mentorship play in your career? 

Well, I think you’ve heard a little bit of it. I would call it mentorship relationships, role models—they’re all sort of the same concept. And for me, first it started with the role model of Andrew Brimmer, first Black governor of the Federal Reserve, and suddenly this kid wearing Coke-bottle glasses in Northeast DC decided he wanted to be an economist.

And then, along the way, a number of professors who saw in me some ability to maybe actually get that PhD, and the advice I got from my friend Liz Allison about the law and economics thing that was emerging—very helpful. Obviously, the informal mentoring from my friend Ben Friedman got me informed about what was going on in the world of money and banking, even though I didn’t take formal classes with him. And I can name many, many others. In my case, [former Fed Chair] Alan Greenspan has proven to be a great mentor and teacher, plus people that are not particularly famous to anybody other than me. A guy named Jim Goodrich, who was at one point the chief administrative officer at McKinsey & Company, played a really important role in my career on my path toward becoming a partner there.

I’ve been blessed to have great role models, great mentors, and I’d say folks with whom I’ve had long relationships, and they’ve been important. But I’m quick to add, because I think people sometimes overplay the “who you know” aspect when I tell them my story—“Oh, you know those people”—yes, but it’s also what you know, right? Because relationships will only get you so far. They will get you to the door, maybe allow you to knock on the door, but you only get to walk into the room, open the door, and successfully enter based on what you know, because a good mentor, a good friend, a relationship person—they can only vouch for you. They’re not going to vouch for you fully if you’re not highly qualified.

And so I always worry that people think, “Oh, it’s just all about relationships and who you know.” Knowing and having good relationships is always important, but it only pays off if you actually bring the skills necessary.

Yeah, if you can do the work.

You have to be able to do the work. 

We want to end on something fun. I’m assuming, over the course of your career, you’ve had a lot of interesting work trips or meals. Is there one memory that stands out to you as particularly fun or special or exciting?

Well, yeah, there was one that was fun. It was fun, both in it being important and not being important, which is: my wife and I both received this honor in the United Kingdom called having the “Freedom of a City.” This is an ancient honor. It goes back to the City of London, then the financial capital, where they selected individuals for a variety of reasons and basically gave them a few special honors that others didn’t have.

And one of the honors of having the Freedom of the City of London is you have the right to drive sheep across London Bridge without paying taxes. This used to be very important when the slaughterhouses were outside of London, and so it was a way for people to basically do commerce without paying taxes, which, you know, people always want to reduce their taxes.

So my wife and I have now both gotten this honor, and we will go and be able to drive sheep across London Bridge on the first Saturday in September, I think, of next year. So this is a funny, cute little thing that we’ve become—both of us have this honor together, which is nice—and with it comes the right to drive sheep across London Bridge, which we intend to do. And it’s just a cute little crazy, fun, weird, ancient tradition. 

So here I am. You’ll see me all dressed up, herding some sheep across London Bridge with my wife and a bunch of other freemen of the City of London.

Sounds like a great vacation!

It means nothing, but at one point it meant a lot. But this is a very ancient right and it’s both serious in some ways, because we got it, both of us, because of things we’ve done in the financial markets, but the only honor that goes with it is the right to do this silly thing, which is driving sheep in the heart of London. So we’re looking forward to it.