roger w ferguson, jr : the importance of education remarks by roger w ferguson, jr, vice chairman of the board of governors of the us federal reserve system, at the commemoration of black history month, the johns hopkins university applied physics laboratory, maryland, 24 february 2006. * * * i am pleased to have the opportunity to be part of the applied physics laboratory's commemoration of black history month. your theme, " celebrating community : a tribute to black technical, educational, and social / civic institutions, " aptly highlights a number of the key building blocks that have enabled many african americans to fulfill their personal dreams. in that regard, i would like to focus my talk today on education - - its importance and its ongoing role in economic achievement. as members of an organization dedicated to cutting - edge scientific research and development, you undoubtedly deeply appreciate the ongoing need for our nation's workforce to embody advanced levels of training. investment in human capital - - as we economists like to call it - - is critical to generating products and services with high economic value. today, much of that high - value output demands workers with the creativity, cognitive abilities, and skills to interact with challenging technologies. in addition, ongoing innovation requires workers to be flexible and to be willing to view education as a life - long commitment. in short, an educated workforce is a must if our economy is to continue to enjoy significant gains in productivity and living standards. at the same time, the link between education and individual economic success is well documented. an investment in education is associated with a higher probability of employment. for african americans, a college degree can substantially narrow the longstanding gap between their labor market experiences and those of whites. last year, for example, when the national unemployment rate averaged 5. 1 percent, the jobless rate for black adults ( 25 years and older ) with a bachelor's degree or higher was 3. 5 percent ; for white adults, the jobless rate was 2 percent. for persons with only a high school diploma, both the rates of joblessness and the disparity between the rate for blacks and that for whites were greater : an unemployment rate of 8. 5 percent for blacks versus 4 percent for whites. perhaps more indicative of the economic value of education, workers with college degrees earn an education premium, and that premium has risen over the past twenty - five years. most economists have found that an additional year of schooling typically raises an individual's earning power between 8 and 15

firms. the federal reserve, with which fhfa consulted on the conservatorship decision as specified in the july legislation, supported these steps as necessary and appropriate. we have seen benefits of this action in the form of lower mortgage rates, which should help the housing market. the federal reserve and the treasury attempted to identify private - sector solutions for aig and lehman brothers, but none was forthcoming. in the case of aig, the federal reserve, with the support of the treasury, provided an emergency credit line to facilitate an orderly resolution. the federal reserve took this action because it judged that, in light of the prevailing market conditions and the size and composition of aig's obligations, a disorderly failure of aig would have severely threatened global financial stability and, consequently, the performance of the u. s. economy. to mitigate concerns that this action would exacerbate moral hazard and encourage inappropriate risk - taking in the future, the federal reserve ensured that the terms of the credit extended to aig imposed significant costs and constraints on the firm's owners, managers, and creditors. the chief executive officer has been replaced. the collateral for the loan is the company itself, together with its subsidiaries. 1 ( insurance policyholders and holders of aig investment products are, however, fully protected. ) interest will accrue on the outstanding balance of the loan at a rate of three - month libor plus 850 basis points, implying a current interest rate over 11 percent. in addition, the u. s. government will receive equity participation rights corresponding to a 79. 9 percent equity interest in aig and has the right to veto the payment of dividends to common and preferred shareholders, among other things. in the case of lehman brothers, a major investment bank, the federal reserve and the treasury declined to commit public funds to support the institution. the failure of lehman posed risks. but the troubles at lehman had been well known for some time, and investors clearly recognized – as evidenced, for example, by the high cost of insuring lehman's debt in the market for credit default swaps – that the failure of the firm was a significant possibility. thus, we judged that investors and counterparties had had time to take precautionary measures. while perhaps manageable in itself, lehman's default was combined with the unexpectedly rapid collapse of aig, which together contributed to the development last week of extraordinarily turbulent conditions in global financial markets