Bob McTeer

By David Koenig
Associated Press

Dallas – Robert McTeer’s tenure as president of the Federal Reserve Bank was marked by his endless advocacy for free trade and his belief that rising productivity could trump inflation.

When McTeer held out against raising interest rates in 1999, he was dubbed “The Lonesome Dove,” and he has been mentioned as a possible successor to the Fed Chairman Alan Greenspan.

On Thursday, McTeer re-signed to become chancellor of the Texas A&M University System, apparently ending a 36-year career in the Federal Reserve system, the last 13 as president in Dallas, one of 12 regional Fed banks.

Helen Holcomb, the bank’s first vice president and chief operating officer, was named acting president. She will take McTeer’s spot on the Federal Open Market Committee, the Federal Reserve’s policy- making body, until a permanent replacement is found.

Holcomb, 53, has been the bank’s second-ranking official since 1996, overseeing all operations at its Dallas, Houston, San Antonio and El Paso offices. She joined the bank in 1974 as an auditor and was names a senior vice president in 1994, with duties ranging from financial planning to public affairs.

A Dallas Fed spokesman said Holcomb was not available for comment.

Although their role is not widely known among the public, the regional Fed banks have operational duties to grease the wheels of the economy, such as clearing checks between banks, and they conduct research into monetary policy. Some of it is highly theoretical.

McTeer, who earned a doctorate in economics from the University of Georgia, held Fed jobs in Baltimore and Richmond, Va., before taking over the Dallas bank in 1991.

“He put the Dallas Fed on the map as the free-enterprise Fed,” said W. Michael Cox, senior economist at the bank. “People look to us for an easy, cogent explanation on how the free market economy works.”

Scott MacDonald, director of the graduate school of banking at Southern Methodist University, said McTeer made the Dallas Fed known for analyzing how technology-driven productivity lifts the economy.

Dallas “was a second-tier Fed in research,” MacDonald said. “It’s not that they weren’t good, but they were one in a crowd. They found a niche. It has really moved up in terms of image.

McTeer said he like many things about running a Fed bank, including the economics briefings and speeches.

He made frequent appearances on financial shows on cable TV and built a reputation for making a discussion of job, inflation and productivity trends interesting to general audiences. He did that partly by including references to country music lyrics, Yogi Berra and sometimes a haiku about monetary policy.

The comments of Fed presidents can make news and move financial markets. McTeer said that when giving a speech he aimed “to give the audience a lot without giving the press more than I should.”

Cox said his boss wanted “to say things that would enlighten folks, and only very occasionally did he get his foot anywhere near his mouth.”

Cox said Greenspan and a few others, including McTeer, led a change in economic thinking during the 1990s: Growth could occur without high inflation.

When unemployment fell during the lat 1990s, many economist worried about renewed inflation, and the Fed applied the brakes by raising sort-term interest rates.

Twice in 1999, McTeer opposed the increases, saying that technology had created a new economy that didn’t necessarily behave by the old rules. He was proved right. During a 10-year growth period that ended with the 2001 recession, inflation never reached the levels seen in previous booms.

Reprinted with permission of David Koenig, Associated Pres