By Lisa Lochridge, FFVA director of Public Affairs

The Federal Reserve made headlines recently when it announced plans to let Wall Street’s biggest investment banks borrow as much as $200 billion and use mortgage-backed securities as collateral. The goal was to loosen up credit markets and restore confidence by injecting money into the system.

Also in March, the Fed issued its Beige Book report detailing decreased retail sales and a flagging housing market. So named because of the color of its cover, the Beige Book is published eight times a year and summarizes economic conditions by region and industry sector.

Yet the Fed is probably best known for its role in controlling the discount interest rate, often an important signal of whether it thinks the economy is headed for inflation or a recession.

What many don’t know is that Florida’s agriculture industry plays a role in the Fed’s decision-making process.

Veteran agriculture appraiser Edwin “Wynn” Jones Jr. of Port St. Lucie is finishing a second three-year term on the board of the Fed’s Miami branch. Directors are charged with being the Fed’s eyes and ears in their districts, gathering information from key business contacts, economists, market experts and other sources on economic conditions.

In addition, Plant City strawberry producer Gary Wishnatzki serves on the Atlanta Reserve Bank’s Small Business, Agriculture and Labor Advisory Council.

The Federal Reserve System consists of a seven member Board of Governors with headquarters in Washington, D.C., and twelve Reserve Banks located in major cities throughout the United States.

ECONOMIC BALANCING ACT

Setting policy is one of the Fed’s three main functions as the nation’s central bank. It also regulates commercial banks and ensures their compliance, and it provides central services for banks to ensure check payments and electronic transfers work efficiently.

Besides setting the interest rate banks pay on short-term loans from the Reserve Bank, the Fed also buys and sells government securities to increase or decrease the availability of money and credit. It also can change the percentage of deposits that banks must hold as reserves. Using these three tools is a balancing act – the Fed has to make sure money and credit don’t grow too quickly or too slowly.

Jones, whose family has been in agriculture for generations, chairs the seven-member board of Atlanta Reserve Bank’s Miami branch. Other Atlanta branches are in Jacksonville; Birmingham, Ala.; Nashville, Tenn; and New Orleans, La.

EYES AND EARS FOR THE FED

Edwin “Wynn” Jones Jr. of Port St. Lucie is finishing a second three-year term on the board of the Fed’s Miami branch.

The key to putting your finger on the pulse of the local economy, Jones says, is to have a broad group of contacts. And to ask lots of questions.

“The obligation each board member assumes is to report on what’s happening in your area and your business. You’re constantly seeking data from a wide variety of sources,” he said. “I have contacts from convenience stores to boat manufacturers, electrical and plumbing subcontractors, and agriculture – cattle, citrus, sugar cane, sod, fruits and vegetables.” Jones also pores over industry news coverage to keep an eye on trends and developments.

The goal is to find out what everyday business people and consumers are thinking. “I want to know how comfortable people feel. I’m asking them if business is better or worse this quarter than last. What about compared to six months or a year ago? And what do they see happening in the next six months?”

Board members assemble their information, put it in context and present it at a branch board meeting. “We have the opportunity to discuss it. Then all of the branches’ reports are aggregated and sent to Atlanta, where they’re read, analyzed and picked apart. They ask questions and follow-up questions.”  Eventually, reports from all of the Atlanta district branches are sent to Washington D.C. to be compiled into the Beige Book.

The information Jones and his colleagues gather is anecdotal, yet invariably the empirical data gathered by Fed analysts months later confirms and supports their “real-time” information.

The Fed’s decision-making process is thorough and comprehensive, Jones said. “When you become part of this process, you realize the effort the Federal Reserve goes to to accumulate data and seek out a wide variety of sources,” he explains. “You can appreciate the breadth of information that goes into a single decision in terms of their policy statements and advice to the Treasury and other government entities charged with the economy.”

A HUMBLING EXPERIENCE

President Woodrow Wilson signed the Federal Reserve Act into law on Dec. 23, 1913. It was passed “to provide for the establishment of Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States and for other purposes.” As time passed, further legislation has clarified and supplemented the original purpose of the Federal Reserve.

Jones’ background has served him well. He majored in economics at the University of Florida and works as an appraiser specializing in agriculture. He’s also a self-professed student of the economics of commodities. Yet his experience with the Fed has broadened his economic knowledge tenfold, he admits.

“Our role is to act as an informed reporter,” Jones says. “It’s exciting. I’m very much pro-agriculture, and I get the chance to be one of many ag-based representatives who report on the economy of our sector. I view it as a privilege, and I take my responsibilities seriously.”

It’s also been a humbling experience. “It’s because of the quality of people in the Reserve system,” he said. “I think to myself: What is a redneck from Immokalee doing sitting at the Atlanta Fed table talking about economic matters? When you get to know the people who comprise the Federal Reserve family, as they call it, you find that they’re some of the finest business men and women in the country.”

Jones adds that he appreciates the honesty of those in agriculture: “They give you the unabashed truth. It’s much more refreshing talking with them than some from other sectors.”

INSIGHT FOR THE FUTURE

FFVA producer member and Plant City strawberry producer Gary Wishnatzki serves on the Atlanta Reserve Bank’s Small Business, Agriculture and Labor Advisory Council.

Wishnatzki also winds up his term on the Atlanta advisory council this year. He’s preparing for the group’s next meeting in April.

He describes the meetings as give-and-take. “It’s not just them picking our brains; they also give us an idea about how monetary policy works and what they consider when setting that policy,” he said.

The Atlanta bank’s economists are looking for anecdotal evidence to support what their data are saying. Wishnatzki and other council members provide insight so the Fed will have a good idea of what’s going on on the ground. “They also want to get a feel for trends… for what’s going to happen,” he said. “They have to be forward-thinking rather than focusing on what’s already occurred.”

Like Jones, Wishnatzki gets input from other business executives. “I give them anecdotal evidence from the insight I get from my business associates – it’s not just what’s happening in my business and industry,” he said. The information the council gives the Atlanta bank president helps guide him when the board of governors meets with Chairman Ben Bernanke.

Although the economy is suffering, Wishnatzki credits the Federal Reserve with taking important steps to keep the situation from being worse. “They’ve really acted appropriately for the situation before and after the real estate bubble burst. They have to fend off inflation while keeping the economy going. One of the comments made when this started unfolding was: ‘We’re on a very narrow road with a ditch on each side.’ It’s a precarious position to be in.”

-Fed Photos/graphics from FederalReserve.gov