By Lucy Komisar
Sept 28, 2012

I was having lunch today at the Council on Foreign Relations before a meeting with one of the national leaders in town for the UN General Assembly. At my table was William F. McDonough, president of the Federal Reserve Bank of New York from 1993 to 2003. That meant he was vice chairman and a permanent member of the Federal Open Market Committee (FOMC), which formulates U.S. monetary policy.

Earlier he spent 22 years at First Chicago Corporation and its bank, First National Bank of Chicago, retiring in 1989 as vice-chairman of the board and a director of the corporation. McDonough is a banker‘s banker

When I introduced myself to him and others at the table, I noted, only half joking, that I was a reporter and that anything they said might end up in print. Fair warning. Nobody seemed intimidated.

In the course of the lunch conversation, I mentioned that I‘d heard a lecture from some new breed economists who said that the political issue of the deficit was not real because the U.S. could print as much money as it needed. The only problem might become one of inflation. But in the meantime, without sufficient government spending to deal with the economic crisis, people‘s lives were being ruined because they didn‘t have jobs.

McDonough‘s reaction was that inflation was indeed a serious problem. Obviously, more so than I realized. He explained, “If you had $4 million, inflation might reduce that to $1 million.”

To me that said everything. $4 million? Where in the world would I get $4 million? Or $1 million? And how would any struggling unemployed worker ever have seen that kind of money?

It said to me that people like McDonough care a lot about the people with $4 million (the 1%) and are relatively uninterested in the problems of the rest of us, including the long-term unemployed.