richard w fisher : “ not to be used externally, but also harmful if swallowed ” – projecting the future of the economy and lessons learned from texas and mexico remarks by mr richard w fisher, president and chief executive officer of the federal reserve bank of dallas, before the dallas regional chamber of commerce, dallas, texas, 5 march 2012.. * * * the views expressed by the author do not necessarily reflect official positions of the federal reserve system. i have been asked to speak about the economy. i am going to take a different approach than is typical for a federal reserve speech. i ’ ll eschew making the prototypical forecast, except to note that from my perch at the federal reserve bank of dallas, i presently see that : a. ) on balance, the data indicate improving growth and prospects for job creation in 2012. however, the outlook is hardly “ robust ” and remains constrained by the fiscal and regulatory misfeasance of congress and the executive branch and is subject to a now well - known, and likely well - discounted, list of possible exogenous shocks – the so - called “ tail risks ” – posed by possible developments of different sorts in the middle east, europe, china and elsewhere. and b. ) while price stability is being challenged by the recent run - up in gasoline prices – which has yet to be reflected in the personal consumption expenditure and consumer price indexes but may well make for worrisome headlines when february data are released – the underlying trend has been converging toward the 2 percent long - term goal formally adopted by the federal open market committee ( fomc ) at its last meeting. 1 as to the outlook envisioned by the entire fomc, you might wish to consult the forecasts of all 17 members, which include those of yours truly, that were made public after the january meeting – though i think a puckish footnote appended to the internal document laying out a component of the december 1966 fomc forecast might still apply : “ not to be used externally, but also harmful if swallowed. ” 2 speaking of harmful if swallowed, i might add that i am personally perplexed by the continued preoccupation, bordering upon fetish, that wall street exhibits regarding the potential for further monetary accommodation – the so - called qe3, or third round of quantitative easing. the federal reserve has over $ 1. 6 trillion of u. s. treasury securities and almost $ 848 billion in mortgage -

stated in its preamble. but of this i am certain : it has made the lives of community and regional banks vastly more complicated. like almost anything that comes out of the u. s. congress, it has primarily been a boon to lawyers and consultants and compliance officers, adding to expenses but doing little to help you grow your businesses. we at the dallas fed are acutely conscious of this. we think of dodd - frank as akin to what dr. seuss once wrote about medicine : bis central bankers ’ speeches interest margins for community and regional banks have been shrinking for some 20 years. to be sure, the low interest rates the fed has engineered to bring the economy out of the death spiral threatened by the financial panic of 2007 – 09 exacerbated pressures on margins as we awaited the strengthening economy we are now beginning to experience. but adding the pills and the bills of extra layers of compliance and legal expenses generated by dodd - frank has compounded the difficulty of passing on profitable franchises to your banking heirs. this is why, systemwide, the fed has been sensitive to the situation of banks under $ 50 billion, and especially sensitive to the situation of banks with less than $ 10 billion in footings. to be sure, we are as committed as ever to safety and soundness and the application of the law ; we always have been and always will be. but at the dallas fed, we believe we can apply the requisite discipline required to safeguard our banking system in a way that is beneficial to regional and community banks. we and our fellow federal reserve banks have worked hard to instill a constructive and interactive relationship, rather than a hostile, purely formulaic one, with the banks we supervise. you might have noted that janet yellen ’ s speech of may 1 to the independent community bankers was titled “ tailored supervision of community banks. ” the federal reserve banks take this charge seriously. this is no idle claim. just looking at the eleventh district, we are increasingly being petitioned by banks for membership in the federal reserve system. the number of state member banks in the dallas fed district increased by 8 percent in 2012, by 19 percent in 2013, and we have already increased membership an annualized 26 percent in the first three months of 2014. so i would just say this to those of you who are madder than ( bleep! ) about what congress and the regulators have wrought : the federal reserve knows what community and regional banks do for their communities. we appreciate that