Stern will be stepping down from a post as one of the nation's most important banking regulators. The Federal Reserve System consists of 12 regional banks and the Board of Governors in Washington, D.C. The Minneapolis bank presides over the 9th district, which includes Minnesota, the Dakotas, Montana and northern parts of Wisconsin and Michigan.
The Federal Reserve does things like supervise banks, as well as decide when to expand or contract the nation's money supply. Stern has headed up the Minneapolis Fed since 1985. That makes him the longest serving president of a Federal Reserve Bank.
Neither Stern nor any of his colleagues at the Minneapolis Fed would comment on his retirement. But local economists were eager to express their admiration for Stern's work.
“If you think about people who have an influence on economic issues and affairs in Minnesota, there's very few people who've been on the stage for twenty years.”Louis Johnston, economics professor at the College of St. Benedict and St. John's University
"If you think about people who have an influence on economic issues and affairs in Minnesota, there's very few people who've been on the stage for twenty years," said Louis Johnston, an economics professor at the College of St. Benedict and St. John's University. "Governors come and go, and mayors come and go, but he's been the president of the Minneapolis Fed through all of it."
Johnston said one of Stern's biggest contributions to the world of economics is a book he co-authored with a Minneapolis Fed colleague. It's called "Too Big To Fail: The Hazards of Bank Bailouts." The book came out five years ago and addresses how over-sized banks make the entire financial system vulnerable. So when those banks falter, the government has to jump in and save them to prevent a total financial meltdown. Maybe you recall this happening recently with Bear Stearns, Citigroup, Bank of America, and AIG.
Johnston said Stern has long fretted about this problem.
"He's been talking about this as long as I can remember," Johnston said, "as Minneapolis Fed president, saying 'this is a problem that's lurking here and we had better have a policy to deal with it rather than simply reacting when it happens, because we're going to have a situation where we have banks that are too big to fail and we're going to need to deal with them.'"
Johnston said Stern's treatment of this issue may well steer future discussions of bank regulation to avoid the "too big to fail" problem again.
Ed Lotterman, who was once a regional economist at the Minneapolis Fed, said Stern was also an important figure in the Federal Reserve System because of his unusual style of running the place. Many district presidents dictated the research of the economists underneath them, and it often had to do strictly with monetary policy. But Stern used to be the Minneapolis fed's head of research, and Lotterman said Stern let the current head of research, Art Rolnick, pursue a wide range of topics.
"Art Rolnick has talked about the importance of early childhood education," Lotterman said. "He also wrote about the problems of public financing, of things like financing and so forth. And that's something you wouldn't see at any other fed."
Rolnick might seem like Stern's logical successor. But he turns 65 himself this year, which would likely eliminate him from the running, given the Fed's age restrictions.
The bank will conduct a nationwide search to replace Gary Stern.