Bostic Speaks to the Florida Chamber

Atlanta Fed president Raphael Bostic spoke during the Florida Chamber"s "Florida's Economic Relaunch: What's Next" webinar about the Federal Reserve's actions and continued response to the COVID-19 pandemic as well as the current state of the economy. He also took live questions.


Mark Wilson: [Inaudible] essentially a letter that our speaker today, Dr. Bostic, penned. I am going to include a link to this on the post-webinar note that we send out after today's webinar. If your company has not read what Dr. Bostic has penned on what our national imperative is right now, it ties so perfectly, word for word, policy for policy in terms of what we're advocating here at the Florida Chamber. It's an absolute honor to get to introduce our guest speaker today. He's a leader's leader.

So, let me tell you just a little bit about Dr. Bostic before I officially turn the program over to him. Dr. Bostic took office in June of 2017. He's the 15th president and chief executive officer of the Federal Reserve Bank of Atlanta. Let me tell you what that means. It serves as the Sixth Federal Reserve District. It covers Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee. Dr. Bostic is responsible for all of the bank's activities, including monetary policy, bank supervision and regulation, as well as payment services.

Dr. Bostic is also a participant on the Federal Open Market Committee. He graduated from Harvard University with a combined major in economics and psychology, and his doctorate in economics is from Stanford University. Dr. Bostic, it's an absolute honor to have you with us today. I know we have members of the business community from all over Florida today, from every industry that you can imagine, and we're very much looking forward to your comments today, sir. So, the floor is yours.

Raphael Bostic: Well, thank you, Mark. It's really good to be here. Thank you for the kind introduction. I didn't know you were going to show so many pictures of me in the introduction, but I really appreciate it. I'm glad we have some good media people here at the Bank. I also wanted to thank the Florida Chamber of Commerce for inviting me to speak here this morning. We've had a very strong relationship and partnership with the Chamber for quite some time on a number of important economic issues. You heard Mark talk about ending inequality of opportunity, which is something that I've been pretty passionate about for many years.

I didn't realize you guys had done those maps about where kids in poverty live. That's actually something that we here in the Atlanta area are also working on. I'm on the board of the United Way of Greater Atlanta, and we have a child wellbeing initiative as well. We're doing exactly the same thing, trying to identify the ZIP codes and the counties where we're seeing these problems. One thing that has struck me is that these problems and these challenges are not just in one place; they are across an entire live area, so this really is a problem for all of us to try to tackle.

I would just say, I'm really pleased that we are having that partnership. I look forward to doing more with the Florida Chamber. Mark also mentioned Greg Hale, and I just wanted to also give him a shout out. He's been a great supporter of the Federal Reserve Bank of Atlanta, mainly through the Miami branch that we have, and I'm really looking forward though to having a deeper relationship and trying to get him up to Atlanta on a more regular basis. So Greg, it's good to have you here, and thank you for all that you're doing.

What I thought I would do today is talk for about 15 or 20 minutes about where we've come from and what we've gone through, and also what I think about the future and how I'm trying to understand what's going on. As always, the remarks I'm going to give today are just my views, so they're not views of anybody else in the Federal Reserve System or the FOMC, so it's all on me.

I wanted to just start by saying that the Florida Economic Relaunch program that you guys are doing, Mark mentioned that it's trying to return to pre-COVID levels. In my view, this is exactly the right focus. This is a pandemic and a crisis that really in many regards was an exogenous shock. It's something that came from outside. It wasn't really about the economy or economic fundamentals. And indeed, when the virus arrived here, the fundamentals were quite strong, so if we can preserve those fundamentals as much as possible as we go through this crisis, I think the recovery can look strong and can be robust.

But we had the crisis—the virus did come—and the thing that we have to just recognize is that the economic response to the virus was not mandated by econ people; it was mandated by public health folks. They decided, they understood that one of the most important things to get the virus under control was to manage the social distancing and reduce proximity as much as possible to prevent the spread of the virus, and this was going to have implications on the economy. Without having proximity, we were going to have much less ability to do commerce and that was what was going to happen.

So, the question and the challenge that we had is just making sure that we create bridges from that pre-virus environment to the post-virus environment, and make sure that those bridges are sufficiently solid such that those people and businesses and nonprofits and governments could all survive and be at least close to as strong as they were before the crisis happened. So, one thing [inaudible] was happening, the Federal Reserve, as you know, has jumped into action. We reduced our fed-funds rate extremely fast to just about zero, and we stood up a number of facilities that were jointly designed to try to make sure that the basic functioning of financial markets in the economy continued.

Just to give you some context, in the Great Recession, we also stood up facilities, but it took us 18 to 24 months to stand up just a couple of them. We announced nine facilities and got most of them up in just a couple of weeks. So, the Fed really did move quite quickly, and the relief that we offered spanned a whole host of areas, from the fed funds market, to federal government bond markets, to corporate bond markets, to money market mutual fund markets.

We've been dealing with municipal bonds as well, dollar swap markets. It's been a wide swath of the marketplace and financial markets. [inaudible] we saw significant spikes in terms of the risk premia that were associated with credit and debt. Those spreads have come down significantly. They're still elevated, but they're elevated in bands that are much more close and more comfortable, relative to where we are.

I also wanted to mention that the Fed did a couple other things. So, we're big in payments, and we're the vehicle by which all of those $1,200 checks, payments went out. So, the Federal Reserve Bank of Atlanta, my staff actually, manages the payments for the country through the Fed. So, we were the vehicle for that. Cash demand is up. You may have heard in stories last week about how cash and coins, there has been something of a hoarding of those. That has impacted us. We've worked really hard to try to make sure there's enough money in circulation so that people can do the things that they want to do.

Then, in terms of our role as a banking regulator, we have really tried to make it clear that it's our view, and it's certainly my view that banks should be as helpful as possible, do all that they can to be part of the solution, and deploy as much capital as possible in the purpose, or with the purpose of trying to provide that support.

Now, that's all the Fed, and that's a lot, and we've done it very quickly, but you've heard officials saying, and I've said this as well, monetary policy and the things that we do can't solve every problem and are not really well suited for every problem. So, I'm grateful to say that we've seen also a pretty significant fiscal response. This fiscal response has gotten relief to many, many different sectors, many parts of the economy. So, I mentioned the economic impact payments, we had unemployment insurance that helped bolster people who lost their jobs, we had supports to give to businesses. I'm sure you all are aware of the Paycheck Protection Program and the money that's flowed through there. Then, there's been supports to specific sectors as well such as hospitals, and airlines, and the like.

Now, all of these have been designed to provide relief and be the foundation of bridges to try to make sure that we span, moving forward, this crisis and wind up in a good place. So, all that's happened, and for me, the big question is really, what has it meant? Has the relief gotten to where it needed to get to, and are businesses and families and nonprofits and governments being able to operate in a more stable and resilient way? So for the rest of my time here, I just want to talk to you a little bit about the things that I'm seeing and what I'm expecting.

There are a couple of points that I want to just start off with right off the bat. First, is that there's still a lot of uncertainty in the marketplace. There's uncertainty about how the virus is going to progress. I'll say a little more about that. There's uncertainty about how businesses are going to make decisions and invest or not invest. There's uncertainty about where consumers are going to decide to use their resources and funds.

Because this pandemic is something that's really unprecedented—we don't have a long track record or a repeated track record of going through these experiences—it's very hard to know exactly what to expect moving forward. If you look at forecasters, and my team has done a lot of charts [inaudible] what forecasters are expecting and what businesses are expecting in the next 12 to 18 months, it's a wide range. So, the band is extremely wide, which just reflects the amount of uncertainty that's out there.

Then, the second thing is that I'm trying as much as I can to look through a lot of the numbers that are coming up. We knew that the public health response was going to really lock down the economy and force those numbers to look bad, but that's all backward looking. One of the [inaudible] understand much better... moving forward, a question I've had in my mind is in terms of all the job losses that we've seen reported—how many of them are going to be temporary losses as opposed to how many of those are going to be permanent losses? That's something that I've really focused on.

Stepping back, big picture, my outlook for the economy for the rest of 2020 is that the second half is going to be much, much better than the first half. We've started to see that already, and in some regards, the rebound has happened a little sooner than I had expected, but I think we're going to see those rebounds continue in the third quarter and moving on into the fourth quarter as well. But importantly, when we get to the end of this year, our level of employment, our level of output in my outlook is that it's going to be below where we would have been absent the virus. So, there'll still be room to move, which is one reason why I think our policies should stay in an accommodative position until we get much back closer to where we were before and start to see the economy performing at the mandate we expect in terms of levels of inflation and also low level of unemployment.

OK, so now, we are right now trying to understand exactly what that trajectory is going to look like. We have a sense that things are rebounding, but how close to pre-virus are we going to get. That's what my staff and my team has really been spending much of their time doing over the last couple of weeks. I wanted to just talk a bit about some of the things that we're seeing, particularly on the employment side, because I do think that this question of permanence versus the temporary nature of job loss is going to be a critical factor in determining, in terms of shaping what the trajectory of what that economy is going to look like for the rest of this year and into 2021.

I wanted to just offer three punchlines on this. The first has to do with the furloughs themselves. In the conversations we're having with business leaders and employees, what we're hearing is that there are very varied perspectives on what is going to happen in terms of the furloughs. And there are a couple of possibilities: so furloughed employees come back and they get their jobs, they start working again, a second is only some of them come back, and then they work at reduced levels of intensity, and a third is that none of them come back, or that the furloughed workers just don't come back. There's a fourth, actually, that we're going to get new furloughs moving forward.

What we're hearing is that there's a real mix in terms of expectation in that regard, and much of that is linked to specific experiences with regards to demand for products. So, if you're in those sectors where the demand has come back strong, you're bringing back your workers, you're hiring and you're robust. If you're in those sectors where the demand is a bit weaker, such as hospitality, for example, or tourism, that kind of recovery is going to be much, much weaker.

Then, there's the second worry that we're also hearing, which is that what's going to happen when the relief runs out. So, for many of you business leaders, you know that the PPP funds have to be used in a certain period of time. The deadline during that first batch unemployment insurance is also expiring at the end of July. So, there's a worry about what's going to happen, and part of the worry is that we have pretty clear evidence that those relief measures actually worked and they helped. We've been doing surveys and the PPP funds have really been quite helpful for businesses, and they've really gotten to many businesses that had the most need. So, we want to make sure that... as those things run out, that we understand what's happening.

Now, a second punchline is that rehiring has been choppy. So, even among those firms that have been trying to rehire, my staff has heard from them, there's something of a timing mismatch. Part of the timing is that for many, they're getting unemployment insurance, and their unemployment insurance has been pretty generous. So, employees or former staff members are reluctant to give that up. So, in some sense, there's been something of a crowding out.

But, on the other hand, and a second type of time as much has to do with the virus and virus control. In your area, Disney and Disneyland in Orlando, I guess that's Disney World in Orlando wants to reopen, and they're hearing from their workers some concerns about their exposure to virus and the risks. That timing is another area where we're having challenges.

Then, a third punchline in terms of what's happening, in terms of these jobs is that structural changes are being pursued that are likely going to eliminate jobs permanently. So, in many sectors, business leaders, what we've heard, have been contemplating, have had on the table for a while, making investments to improve efficiency, maybe by automating some processes or introducing new technologies. In other instances, we're learning through this process that there are new ways of getting work done, and those new ways might actually require fewer workers. In both these cases, when firms are doing that, what we're hearing is that their reduction in jobs can be fairly significant, on the order of 10 to 30 percent. So, as those evolve as well, we're going to start to see a shuffling out of particular sectors.

Now, a key thread in all of this is that demand realities and concerns are paramount. If businesses don't have the demand for their goods, then the demand for workers and all those things is reduced. Ultimately, this brings us full circle, and it brings us back to the public health response. So, I wanted to close just talking a little bit about what we're seeing in terms of the public health response and the implications for the trajectory of the recovery.

If you've looked at the papers in the last couple of days, what you've heard is that the infection rates have increased pretty significantly. I think yesterday was a high watermark through our entire COVID-19 experience in terms of the numbers of infections that we're seeing in the country. The Wall Street Journal reported, I think last night, that they did an analysis and saw that the seven-day average in terms of infections is up in 33 states relative to what it had been the previous seven-day period. So, we're seeing the virus become much more prevalent and much more present in a lot of places where frankly it hadn't been seen before.

In that regard, I actually think that Dr. [Anthony] Fauci's observation yesterday that we're actually still in the first wave of this virus, we haven't hit the second wave yet, is actually quite right in the sense that in many of these markets, this is actually the first flow-through of the virus. New York had its experience, New York metro area had its experience, the Bay Area and Washington state. But that wasn't a national first wave; that was their first wave, and now we're seeing this wave happen through other places.

I have to say, for me, this is a real source of concern because it does suggest that there may be some risk out there that businesses and households are going to have to consider. The reason I'm worried is that ultimately our economy operates on confidence, and if workers and the consumers are not confident they can go into a store and not get sick, they're not going to go, or restaurants, or wherever; the same story with workers. So, getting the virus under control and having people feel confident they can go and do the things that they want to do without putting themselves and their families at risk is quite important.

So, we need to be thinking about how do we manage that virus, how do we manage our public response to that virus so that those risks are actually reduced. I also wanted to say, there have been promising developments, and these are important. For example, I think we actually have a pretty good understanding now of the most likely ways that the virus is going to get transmitted, which then suggests that we have a good idea about how to prevent that transmission, so masking becomes quite important. We're also learning through the medical field about how to treat the virus. [Inaudible] treatments can reduce mortality, we're learning. And with every day, the medical profession learns more, which means that if we can buy time through doing things like masking, we can get the virus under control much better.

But, I do also want to say that there are new concerns as well. Here in Atlanta, the virus is reaching into new populations. So, Latino populations who live in more crowded conditions are finding themselves much more at risk these days, and this is something we actually need to pay attention to. We're also learning that some of the health impacts are different than we first understood or believed, particularly among children and young people. So there are risks out there, and as long as those risks are present, we need to be diligent and move forward.

So, let me stop there and then maybe we can open up for questions.

Wilson: OK, Dr. Bostic, thank you so very much for that. It's Mark Wilson here again. We actually do have some questions, and really appreciate your kind words too about what we're working on here in Florida, and I can't say enough about your team at the Federal Reserve. There's a lot of people on your team that are on first-name basis with people on our team, and [inaudible] a great leadership, and I appreciate what you're doing.

I heard you say, and I wrote it down, "Ultimately, our economy operates on confidence." We've been talking here in Florida about pre-COVID, companies would compete based on price and product and service. Now, that's not enough. Now we're going to be competing on do customers and employees think that you're a safe place to shop and work, and what a premium do you put on health. So, really appreciate your words there. That ties very nicely to the way Florida's business community is very much trying to safely move forward.

So, I'm going to take questions in the order that they came in here. There was a question about whether our slides are going to be available later today; of course they will. We'll send a note out later today and the slides will be available for everyone. Dr. Bostic, a question here for you. I'm just going to read it verbatim. It says, "Dr. Bostic, with the number of coronavirus cases rising in the states that have already reopened, how worried are you about a second wave, and do you think the economy will have to shut down again if there is a second wave?" Now, I know you commented on this a moment ago, but since it was a question, I thought I would ask it.

Bostic: Yeah, no, it's a good question. I am worried, and mainly because I think that what we could do is preventable, right? If we manage our public health response, if people wear masks in public spaces and don't [inaudible], I think that's a way to move forward such that we would get a fairly steady recovery and rebound. We've been having lots of questions, discussion among our staff at the Bank about what does that second wave shutdown look like if that's going to happen? My expectation is that it won't look the way the first shutdown did because we know more.

I would expect there'll... more surgical application of the rules, and guidelines... constrained... not keeping myself safe... that this is going to cascade through even though it won't be our overall psychology, but where people might just throw up their hands and say, "You know what, it's not worth it. I'll just do my takeout [inaudible] my takeout restaurant, I'll do Netflix instead of going to the movies, and I'll go to a state park instead of going on a cruise." If that becomes the psychology, I think we're going to have a different kind of trajectory in the months to come.

Wilson: Dr. Bostic, thank you. There's another question here on the rebound. On the comment you just made, Dr. Bostic, about possibly a further shutdown down the road—no one really knows, but one thing that's interesting... I serve as the national chair of National Association of State Chambers, so every week, we have all 50 state chamber presidents on the line, and one of the things that you would know but isn't obvious to people inside a particular state is that all 50 states didn't do this the same way.

So, states like Michigan and Pennsylvania, they actually really did shut down, and states like Florida, we kept a fair portion of our economy going. So, we were maybe at a slow jog whereas other states actually came to a complete stop. They closed the game and told everybody to go sit on the bench and wait for the rain delay to go again. So, it's going to be interesting to see some states like Florida, we started off... We never actually really closed down, so if there's a second wave, and there has to be a so-called second shutdown, it's going to be interesting.

It ties to the question, it says, "On the rebound, given how quickly that it happened, how high is the risk going forward as we realize that the virus is going to be with us for a while?" In other words, I think what the question is is, the virus is not going away in a couple of weeks or a couple of months... I'm hearing more and more accounts it could be here next summer just as much as it's here this summer. So, given how quickly all of this is coming in, how high is the risk going forward, given that this isn't going to be done anytime soon?

Bostic: Well, I think that you have to consider this really as a public health issue first, and it's a question of how well do we manage the public health issue. Do we get testing that's robust and widespread; how easy or quickly do we get practices and protocols that allow us to have people return to work? And one of the things that we're thinking about for our building is, we've got elevators, we've got 1,100 people in the building; how do you manage the flow where the recommended number of people in elevator is two? That's going to take time to figure those things out.

If we can figure that out and have them applied in ways that do really impart confidence in my staff, that staff will come back and they'll do all the things that they need to do. Or maybe we find out that we can do a lot more remotely, such that some of the challenges that we face can be overcome in different ways. So, I think we're in a very fluid time right now as every business, everyone on this call is trying to wrestle with exactly those things; how do I make my workplace a place that people are comfortable engaging with? I actually think that's important.

Now, the other piece is much more broadly. So Florida, you got a lot of beaches, you have parks and cruise lines and all that kind of stuff. They've got to figure that stuff out as well, and in those spaces, sometimes creating an environment is more difficult to enforce, which then can lead to different kinds of interaction. So, those are things that we're trying to watch frankly, to see how is the public, writ large, taking this and what are the applications for the public response for what we might expect in terms of economic performance.

Wilson: So Dr. Bostic, you cut out at the end there, but I think we got the gist of that. I want to ask you, there's another question here about what have we learned from other countries, other nations. So, the question, the caller thanks you for your comments, and says, "What have we learned from other nations about how to avoid a resurge closing us down again?"

Bostic: So, we talk with our central bank colleagues all the time about what's going on, and I think as you see in the news, we see pretty significant evidence and a consensus emerging that wearing a mask is an important thing, and if you wear masks, that you can really reduce the transmission rates pretty significantly. A second thing that we're starting to grapple with, and I'm trying to think about, is we have comorbidities that make the viral impact more significant. We have ways that people live that make the virus more significant, in terms of the layout of housing and all that kind of stuff. We need to figure that out as well.

We're watching Europe pretty significantly. I think if you looked at the timetable, they're about two and a half, three weeks ahead of us in terms of what's going on. We're trying to learn the lessons that we can from them. As I talk to leaders in cities across the Sixth District, they're lifting up those sorts of examples, saying the Netherlands or in other parts of the country, where they're seeing urban places manage this significantly. I think one lesson that we are learning is that being completely passive—it brings risks with it. So, we want to make sure as much as we can that we do take and have measures in place that everyone understands.

Wilson: OK. Thank you very much for that. The question about looking at other countries is really interesting because if you look at whether it's Singapore or some of the other countries that had to shut down for a second time, to your point that they're weeks and months ahead of us. We didn't know the importance of masks, and so some of them closed down a second time before they had the knowledge of the importance of masks. So, it's going to be very interesting to see what impact that has here.

Let's see, I have several other questions. Let's see. I'm going to ask one here. It says, "In such a fluid situation, what particular data or conditions are you and the Atlanta Fed watching most closely to gauge economic conditions and trends?"

Bostic: I would say two things on this. One is that we've had to be more nimble and more creative than ever before because most of the data infrastructure that we have in place is either backward-looking—so tell us what happened a month, a month and a half ago—or doesn't have questions that are really relevant for a pandemic. We didn't really design our thing that way. So, our team has really had to be much more proactive and creative in terms of finding pieces of information but also engaging in a different way.

So in terms of the types of information that we're using, we're using information from companies that manage small business payrolls, for example, that can show who's drawing down and who's using their line. That gives us good information about trends in terms of small business activity and the like. We're drawing on data like you've seen in many media reports about movements of people. So if you have a cell phone, we can track exactly where people are. We can get an understanding about how much activity or nonactivity is going on, which can give us implications or ideas about what might be happening in terms of the spread of the virus.

We're also really very much leaning in on our surveys. So, in the time I've been here, the Federal Reserve Bank of Atlanta has really bolstered its survey capabilities. We have a survey of CFOs that we do; it's a national survey. We do a survey of business uncertainty. We do surveys of inflation expectations as well. Of all of those, which are in the field pretty consistently, we've added a bunch of special questions around expectations and experiences. When I talked a bit earlier about expectations about what's going to happen moving forward in that wide band, that came out of one of our surveys.

Then, we also just stood up a survey of lower income and minority neighborhoods. It's a national survey because one thing that we know is that minority-owned businesses often have less capital available, and minority families and lower-income families have less income. So, we might expect the difficulties and the struggles to be more acute in those neighborhoods and be particular to those neighborhoods. We want to as much as possible have an understanding of what's going on there.

One important finding that we've had in the first round of those surveys is that the nonprofits that operate there are finding that there's far elevated demand for their services and their products because there is distress. But, at the same time, they have the same funding challenges as everyone else, so in many regards, they're having to lay off people at exactly the time that their services are needed the most. That's the tension that we're trying to put a spotlight on because those institutions are actually more important now than they probably have ever been, and we want to make sure people are aware and find ways to give that support.

Wilson: Right, thank you, Dr. Bostic. We've got more questions than you have time for, so I'm going to try to ask a couple more here until I know you need to go. You mentioned inflation, and there's actually a question on that. What's your outlook for inflation, and could we actually see deflation as a result of this crisis?

Bostic: So, I'm not expecting deflation, but what I would say is inflation has been muted for the better part of eight years now, for a long time even as our policy stance was quite stimulative. So, I'm expecting that we're going to see exactly the same thing moving forward, certainly for the next six to 12 months. Then, we'll see sort of what happens and how this recovery occurs. There were forces that were keeping inflation muted before, right? So, some of the structural change, some of the introduction of technology was reducing the cost of production, and also what we see in terms of the oil sector and the energy sector. All those things are really designed in places now where we would expect inflation to not be a significant challenge. I don't think we're going to see dramatic changes off of that now, so that's not an area that I have a lot of concern about.

Wilson: Dr. Bostic, there's been a lot said on a lot of our webinars in the last 90 days about who has lost their jobs as a result of this. I can't remember where it came from, but there's a narrative that as many as 40 percent of people who earn less than $40,000 have lost their jobs because of this pandemic. In Florida, you heard our numbers earlier. Half of all of our kids in poverty in Florida live in only 15 percent of our ZIP codes. When you think about those jobs and the importance of those jobs, we also in Florida have a constitutional amendment this fall; we would be the first state in the country to mandate $15 an hour across the board.

We've lost a lot of jobs in that middle-wage, early wage market, and we have this going on. I'm not asking you to weigh in on that amendment per se in any stretch, so please don't take it that way, but as we try to add back over a million lost jobs, how can policymakers, how can business leaders in Florida be thinking not only about coming out of a recession and coming out of a COVID situation, but given those headwinds, do you have any special advice for us about how do we navigate through an economy with perhaps those headwinds out there?

Bostic: Well, you can be sure I'm not going to give an endorsement of the amendment or the other way around, but what I would say is this: the first thing is we have a lot of job loss. Much of it is in public-facing sectors, so hospitality, restaurants, hotels, those sorts of things. Many of those wages are at the lower end of the spectrum, and so we are seeing, and this is not uncommon for a recessionary environment, that low-wage workers are the ones that get hit the hardest and the fastest.

Now, fortunately the relief packages have been able to get to many of them, which has forestalled perhaps the full blown crisis that we might have had otherwise. But, as I mentioned, a lot of these packages are expiring, and we have to ask ourselves what's going to happen when they do. In terms of what's going to happen, I think there are really two pieces here. One is that hopefully many of those jobs are not permanently lost, and that we will find ways to make sure that their employers have bridges that allow them to keep a connection to those workers so that they can get back to work.

Then, the second, and we are wrestling with this a lot at our Bank in terms of economic resilience, is the conversation about what a living wage looks like, and how do we balance the idea that you have, and I've been talking about this with my team, so this is a very personal issue. If we've got wages at levels such that my staff has got to work two and three jobs, we got to think about that, and think deeply about that. So, thinking about the structure of wages versus the structure of the cost of living is something that I think we always have to balance, and we've got to find ways to find those sweet spots because it's a collective problem and we need collective answers.

Wilson: Thank you. Maybe last question, one came in about bank balance sheets. It says, "Dr. Bostic, how concerned are you about bank balance sheets, especially ones with significant exposure to retail and hospitality?"

Bostic: Fortunately, banks came into this crisis far better capital-wise than they did in the Great Recession. And the reforms that came out of the Great Recession in terms of banking, I think, were very helpful in making sure that banks were positioned to not be in crisis. I've not seen a lot of headlines about banks needing infusions of capital or any of that sort of stuff. Actually, I haven't seen any to be honest. I think that's a result of the reforms that are in place.

Now, the longer this goes, and the more that we see the stress on businesses, certainly we will have to put heightened attention on how bank balance sheets are going on. What I will tell you is that right now, none of our banks are in that state of crisis, and we're having conversations with them about how to manage that. Many are increasing their provisions against lawsuits, but I'm hopeful that as we get to this rebound and this rebound continues, that the stresses that banks face, they're going to be less than they expected. In part that might be because they're going to restart it sooner than many expected, and the relief has really made a big difference.

Wilson: Well, Dr. Bostic, thank you. I know I said last question, but there was another one here that tied to our prosperity conversation and inequality of opportunity that I wanted to see if you could answer. Is that OK? Do you have a second?

Bostic: It's all good.

Wilson: OK. So, I'm just going to read you the question. It says, "You and your staff at the Atlanta Fed have made improving economic mobility and resilience a major priority. Can you tell us why that concern is so important to you and your colleagues, and then could you discuss how this unusual economic downturn is affecting our most vulnerable populations and what the federal government could be doing to address this?" Obviously, that ties directly to our 150 ZIP code challenge we have, so we'll give you the last word. We'd love to hear your answers, and we'll give you the last word here as well.

Bostic: Well, thank you. What I would say is this, the Fed has two mandates. One is stable prices, the other is maximum employment. When you think about what maximum employment means, it's really a function of who's employable, who has the skills and the connections and the networks that allow them to work, allow them to be entrepreneurs and run businesses and do all those sorts of things.

To the extent that we have large segments of our population or significant segments of our population that don't have access to... job training and those sorts... are employable at a far lower [inaudible] otherwise. That means [inaudible] as it would be otherwise. So, when I think about economic mobility and resilience, it's really about trying to make sure and maximize the number of people that are employable so they can contribute to our economy and make us a lot stronger.

So in our bank, we're thinking about a lot of issues because this runs across a lot of areas. It runs across education; it runs across job training. In some places, there's a mismatch between where people live and where the jobs are, so it may involve transportation. In some instances, it's about the [inaudible] benefits, so filling a project right now, really try thinking about the notion of a benefits cliff.

If people get assistance for housing or for food stamps or the like, if you get an extra dollar of earnings, you lose a dollar in that support. So, if you have support from two or three sources, you get one dollar, you may lose two or three dollars. You might actually be worse off for some period of time, and that's a disincentive. So, we want to look at our incentive structures to make sure that we're not putting hurdles and barriers in front of people that make it less likely that they're going to strive to achieve and be self-sufficient, and really contribute to us.

So, I think all of us need to be looking at what barriers we might be having, whether it be inside our companies; do we have policies around reimbursements or time off, or those sorts of things that might constrain the ability of our workers to be resilient. Then, we need to be looking across all the things that happen in our economy to understand and identify those things where there are barriers and see if there are ways to mitigate those or maybe even get rid of them altogether.

I think if we do this, we can wind up with a much more powerful economy because we're going to have the brainpower of many, many more people. Those young kids who live in those poverty tracks, many of those are smart people, and many of them have the ability and the potential to do great things, but we've got to make sure we create a structure that allows them to nurture that potential and build it into something that is powerful and economically meaningful.

Wilson: Well, Dr. Bostic, thank you so much for your time with us today. I absolutely appreciate your comments, especially there at the end. We are 100 percent aligned. Those benefit cliffs you've talked about are something we all can focus on. Dr. Bostic, we hope that you will join us again in a couple of months when we're a little bit further down the line. Your wisdom is incredibly important, so thank you for your service to our country, and thank you for your leadership. Well, I know you have a hard stop. Thank you so much, Dr. Bostic. We really appreciate the partnership.

Bostic: Well, thank you, Mark. Next time, you've got to call me Raphael the whole time. I don't usually let people do the "Dr." thing, so we'll work on that for next time. But, I'd be happy to come back and let you know what we're seeing in a couple of months. Thank you for having me, and hope everyone has a great rest of the day.

Wilson: Raphael, have a great day. Thanks so much. Take care. OK, so to our membership, what I wanted to do now is I want to move on to...