NY Fed head warns New College grads of economic hangover

SARASOTA — William Dudley is all too familiar with the nation’s current economic crisis.

After all, the New College of Florida alumnus is in the midst of trying to revitalize the banking and financial system as president of the New York Federal Reserve Bank.

So as he delivered the keynote speech at New College’s 44th annual commencement on Friday night, he was certain to warn the 154 graduates of the economy they are about to face.

“I am an economist, after all, so I do have to talk about the economy,” Dudley said. “This is a better year to graduate than last. However, finding a job will not be easy. The unemployment rate is much too high, and the recovery seems likely to be more sluggish than we would like.”

Manatee County’s unemployment rate declined to 11.8 percent in April, representing 17,029 people who are seeking work.

Dudley, a 1974 graduate of New College, attributed the economy’s suffering to the “hangover” of the real estate and consumer spending boom. In addition, he discussed the outfall from the banking collapse — an issue he’s been trying to fix since succeeding Timothy Geithner in January 2009 as the president of the New York Federal Reserve Bank when Geithner became secretary of the Treasury.

Dudley’s agenda for fixing the financial crisis calls for more transparency on Wall Street, a more stable funding market from which the big banks draw short-term loans and seeing that more banks prepare emergency plans to ward off failure.

“The banking system is still under significant stress,” Dudley said. “This is particularly the case for small- and medium-sized banks that have significant exposure to commercial real estate loans. This stress means that banks have been slow to ease credit standards as the economy has moved from recession to recovery.”

The stress has also translated to numerous bank failures across the state and several in Bradenton and Sarasota.

In 2009, Bradenton and Sarasota saw four banks close and two close in 2008. No local banks have closed this year, but Florida has already had 11 bank closures.

Dudley declined interview requests from the Bradenton Herald, but in his speech to New College grads he said the New York Fed is doing what it can to help a quick recovery among financial institutions.

“Coupled with the benign outlook for inflation, these headwinds to growth and employment explain why the Federal Reserve is keeping short-term interest rates unusually low,” Dudley said. “We want to do all we can to support more rapid economic and employment growth, subject to keeping inflation low and stable, and inflation expectations well anchored.”

New College President Mike Michalson, too, addressed the economic situation with New College grads.

Michalson said the parents’ support for their students in seeing that they continue their education is an example of an economy that is trying to move forward.

“With lost jobs, career changes and foreclosures, I cannot imagine the worry that lies behind all the students’ lives,” Michalson said. “But the fact that you made it here today clearly demonstrates that you’re focused.”