Bob McTeer

By Vivien Lou Chen
Bloomberg News

Nov. 4 (Bloomberg) – U.S. Federal Reserve Bank of Dallas President Robert D. McTeer Jr. will resign today from the central bank to become chancellor of Texas A&M University.

University regents approved McTeer’s appointment in a special telephone meeting. He was identified as the sole finalist on Oct. 13. The Texas A&M system has about 100,000 students and includes nine state universities, seven agencies and a health science center. It conducts more than $500 million in research each year.

McTeer is a non-voting member of the Fed’s rating setting Open Market Committee, which next meets Nov. 10. Helen Holcomb, the Dallas Fed’s chief operating office, will become acting bank president until a successor is found, McTeer said in a statement.

“McTeer tended to be something of a non-conformist, regarded as a loose cannon in the eyes of some policy makers,” said former New York Fed economist David M. Jones. “He was willing to comment on contemporary issues in a way that the public understands”

All 47 economists surveyed by Bloomberg News expect another quarter point increase in the benchmark U.S. interest rate to 2 percent at next week’s meeting. During an Oct. 5 public appearance in Austin, Texas, McTeer said central bankers should be able to keep raising interest rates at a “measured” pace that is “slow and deliberate rather than rapid or disruptive.”

McTeer, who turned 62 last month, was one of the first Fed policy makers to embrace the notion that computers had altered the U.S. economic dynamics by the mid-1990s, making faster growth possible without igniting inflation. McTeer stuck by his theory when economy and stock-market booms gave way to recession in 2001.

Cowboy Poet

The son of a rural Georgia truck-stop operator who grew up pumping gasoline and picking cotton, McTeer used humor, plain spoken sayings and cowboy homilies to make his points, sometimes quoting popular icons such as country singer Glen Campbell and Dirty Harry, the detective played by movie actor Clint Eastwood.

He saw his first priority as promoting growth and free-market economics, and considered his cowboy sayings and references to country music a vehicle for doing that.

“I get much of my wisdom form country music,” he said in a 2001 speech before a French audience. He wore cowboy hats and boots and contributed verse and philosophical ruminations to the Dallas Fed’s Web site. In “A Macroeconomic Haiku,” McTeer wrote “The economy is recovering nicely but without new jobs.”

His dissents when the Fed voted to raise interest rates in 1999 earned him the nickname “Lonesome Dove,” the title of a 1985 Pulitzer prize-winning Western saga by Larry McMurtry. McTeer voted twice against a majority-backed plan to raise interest rates that year, as growth held above 4 percent and inflation picked up.

By 2002, the economy was stagnating following the 2001 recession. McTeer and Fed Governor Edward Gramlich opposed the central bank’s Sept. 24, 2002, decision to leave the benchmark overnight bank rate unchanged at 1.75 percent, arguing that the economy needed a rate cut. Six weeks later the panel voted unanimously to reduce the rate to 1.25 percent.

“I must confess to finding some satisfaction in the fact to the Lonesome Dove is not so lonesome anymore,” McTeer said in a May 2003 graduation speech at Washington and Lee University in Lexington, Virginia. “As far as I’m concerned, pro-growth policies are also anti-deflation policies.

Born Oct 22, 1942, McTeer was raised in Ranger Georgia. He earned a bachelor’s degree in economics at the University of Georgia, and finished his doctorate there.

After two years on the university’s faculty, McTeer joined the Federal Reserve Bank of Richmond in 1968 as an economist in the research department. He rose to senior vice president in charge of the bank’s Baltimore branch in 1980 and was named president of the Dallas Fed in February 1991.

Bigger-Than-Life

“He was put in charge of the Dallas Fed to help put it back into shape administratively,” said Jones, now chairman of Investors’ Security Trust co., a Ft. Myers, Florida, community trust bank. “It turned out he gave it much more—a much stronger voice to comment on contemporary economic themes.”

McTeer “was a bigger-than-life character and the Dallas Fed’s board will probably look for someone who is more understated and perhaps more seeped in monetary theory and policy,” Jones said in an interview from Ft. Myers.

McTeer earned $240,200 a year as of Dec 31, 2002, according to the Fed’s annual report. The last full-time chancellor of the Texas A&M System, Howard Graves, earned $400,000 a year. He died in September 2003.

Reprinted with permission of Bloomberg News.