Interview with U.S. Treasury Under Sec. Mary Miller

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Under Secretary of the Treasury Mary Miller
Under Secretary of the Treasury Mary Miller

Mary J. Miller, Under Secretary for Domestic Finance at the U.S. Treasury, is the first woman to hold that position in the institution’s history. The longtime Guilford resident is “responsible for developing and coordinating Treasury’s policies and guidance in the areas of financial institutions, federal debt financing, financial regulation, and capital markets.” She also currently serves as Acting Deputy Secretary for the Treasury until the confirmation of former Maryland Commissioner of Financial Regulation Sarah Bloom Raskin as the first female Deputy Secretary of the Treasury.

“Secretary Geithner was serving at the time of the highest number of women at top jobs at the Treasury ever,” Mrs. Miller says.   “I’ve felt lucky to have this opportunity.”

Mrs. Miller made her luck over twenty-six years in the private sector, eventually becoming director of the Fixed Income Division of T. Rowe Price as well as a member of  its management committee, and says she couldn’t have worked at a better place to prepare her for her job as under secretary.

President Obama brought her from T. Rowe to Treasury in 2010 as an assistant secretary for financial markets, giving her responsibility for the Office of Financial Markets at a very uncertain time in economic history. Specifically, she says, “that office directly oversees all of the Treasury auctions. One of the things I did was visit our investors around the world. I think I visited 18 countries in my first two years and talked to reserve managers who buy treasuries. What you really come to appreciate is how much faith and confidence people around the world have in the U.S. It may not always feel that way, day to day, but people have a lot of trust in the United States, and one way they reflect that is they buy our securities, because they know that they’re going to be rock solid.”

Nowadays, as Under Secretary, Mrs. Miller is trying to figure out the future of housing finance.  “The big issues are making sure that housing is affordable in the U.S., and that it’s financed appropriately, that the government isn’t taking on all the risk,” she says, “and that the homeowner and the financial institutions that create mortgage loans have the proper balance when taking on exposure.”

We caught the under secretary, who has lived in Baltimore for over 20 years, in a rare free moment to ask her how she got where she is and about the challenges of her demanding job.

You didn’t always know you wanted to work in finance?

I come from a highly academic family. My dad was a college professor, and he taught History for almost 40 years at Cornell. My mother was raising six children but also teaching along the way. She taught creative writing at the college level, and she ended up working at Cornell in her later years in the rare books collection at the library. So I grew up around universities and colleges. I thought I would probably go in that direction, but it never really took. After graduate school — I have a master’s degree in city and regional planning, which has actually been very useful in some of the things I’ve worked on — I went to work for a think tank in Washington called the Urban Institute. And I was there for a little over three years. If I wanted to continue doing the research and studies that they did, it was obvious to me I’d have to get a Ph.D. in some field – Economics, or something else. And I just didn’t think that’s what I wanted to do, and I kept getting more and more interested in more quantitative problems, and that led me to think about public finance, and that led me to take a job at T. Rowe Price, where I was hired as a municipal bond analyst in 1983. I think maybe what I hadn’t paid attention to growing up was that I was much more quantitative than drawn to the social sciences, which is where my family was. I have a sister who is a professor of philosophy. I have a brother who is an artist. I also have a brother who is a lawyer, and another who is an economist. We all have different types of skills, but I grew up in a world that was not business oriented, so it took me a while to figure out what to do.

What do you mean when you describe yourself as not a political person?

What I’ve learned in my present job is that you can’t ignore the political process. It is always part of the discussion. But I think what I brought to the table in the government was practical skill and knowledge about financial markets, financial issues. I have liked working at the Treasury because it’s a very practical sort of institution. You’re financing the government, you’re paying the bills, you’re figuring out how to fund programs. What’s been interesting is more about the policy side of these choices. Things are never as simple as they seem on the outside, and if you’re only looking at it with a business view or a commercial lens, you’re not going to understand all of the moving parts.

Has your graduate degree been useful during your career?

My graduate degree has come in handy because a lot of what we are working on right now is housing finance, and back in the day, the late 70’s when I was getting my degree, I studied housing policy, I studied housing finance, and then I worked in markets, where we invested in mortgage-backed securities, and other real estate related things. So the graduate degree really came in handy at the Treasury, which isn’t normally thought of as a housing agency. HUD is the federal agency that oversees all of that, but because of the nature of the financial crisis, with Fannie Mae and Freddie Mac being held in conservatorship, and the Treasury’s investment in the GSEs, we actively monitor these two large financial institutions that extend mortgage credit. We are optimistic about the prospects for reforming the broader housing finance system through legislation. I found that I needed to pull back a lot of the work that I had done, and think not just about housing finance but about housing policy.

What are we trying to accomplish in terms of housing goals as a country? One thing that’s really exciting is I talked one of my professors from [University of North Carolina at] Chapel Hill into coming to the Treasury, and he’s working with me now. He taught me housing finance almost 30 years ago. He’s very good on the policy issues, and we have other people who are really skilled on the financial issues, and you need to put them together to figure out the right path. In a nutshell, I think the key questions are: How do you make sure that the market is functioning well, that you have enough private capital and enough of the right incentives in the market? What is the government’s role in housing finance? Where do we provide a guarantee and who do we extend that to? How do we make sure there are appropriate levels of access to mortgage credit? How do we not get stuck in a place where we’re over-preferencing homeownership over rental? If you look around the world, there are many countries that have higher levels of rental than homeownership, irrespective of wealth or personal income. People just make different choices about how they want to use their personal finance for housing – if they want to rent or own – and the housing finance system should make it easier for people to make this choice.

The cost of housing, whether home ownership or rental, is likely to be higher with recovering home prices and higher interest rates. Housing affordability remains attractive now, because rates are still at historically low levels and home prices in most areas are still below pre-crisis levels.

There are a lot of tough questions and a lot of politics involved in housing finance, as I’ve learned. But as the housing market’s recovering there’s an opportunity now to begin to roll up our sleeves and make those decisions, and comprehensive reform is going to require legislation from Congress, and it’ll probably be the biggest housing legislation passed since the 1970’s. This is a big deal. The financial crisis led to passage of a major law in the summer of 2010, the Dodd-Frank Act, which is very sweeping in terms of the things it attempts to do. Housing finance is largely outside of that, and will be another piece of legislation to determine the future of housing finance.

Was it a difficult transition from T. Rowe Price to the Treasury?

The public sector is very different than the private sector. One of the things that surprised me was, first of all, the level of turnover in the government. A President and his administration select the leadership of all the agencies in the government, but there is also a huge number of career staff who stay in the agencies through administrations regardless of party. I think the financial crisis was particularly hard on people who worked through 2008-2009, in the midst of the storm, just tremendous demands on people, and that led to a fairly high level of turnover. This is very different from the private sector, where you try to reward longevity, and maintain stability. It’s a very different environment to work in. The career people who I’ve worked with are very good. Making sure that you keep the institution strong, that you’ve built an institution that’s going to be intact through different administrations is really important.

How does a democratic government deal with the chaos of the world?

We’re a highly critical nation, and a highly democratic nation. I was visiting one country that was not a democratic nation, and they asked, “Why do you allow the people to say the things that they say?” I said “Well, that’s a democracy.” I believe this was during one of our debt limit battles back in 2011. But a country that allows free and open debate is going to have better outcomes than one that doesn’t, and as messy as it seems, we usually get to the right place. It’s very painful sometimes getting there. Having several political parties, having very strong arguments and debates about things…sometimes it just takes time. I can think of issues that didn’t have their moment maybe ten years ago, but there was something building that led to a good outcome. I think it’s not always obvious that it’s going to happen, but if it’s the right answer it will happen. It just takes its own path.

I think the debt ceiling certainly was a real fear, because of the brinksmanship that we engaged in in 2011 and 2013. Both episodes were so bad that I hope Congress decides not to hold their hand so close to the fire again. If you go back to the mid-90’s, when Secretary Rubin was at the Treasury, there was another terrible standoff with Congress about funding the government and raising the debt limit. Then there was a period of quiet for 25 years or more. We’ve probably had two episodes in the last two years that were very damaging in terms of the dynamics of debt management and messages and signals that we sent to the market. So I hope people recognize that it isn’t a good debate to have because it really shakes people’s confidence. At the end of the day, Congress has always acted to lift the debt limit, and that’s good. But getting that close to the edge is not a healthy thing to do. I did not expect that we would default on our debt, but we certainly had to take a lot of precautions.

Have you found many differences in the leadership of Sec. Geithner and Sec. Lew?

Former Secretary Geithner and Secretary Lew are both excellent people to lead the Treasury. They are quite different people – different styles, different backgrounds, different things that they’re interested in. I think the challenge is just to learn a new person, how they want it to work, how they’re going to use their staff, and what issues they’re interested in. I’ve learned things from both of them. It is interesting to work across two terms – we are now in the second term of the president. They are both highly skilled people completely qualified to lead the Treasury, but they just have different styles and interests.

I’ve become really interested in economic and financial history working here – you can’t help that, every day you’re just surrounded by it. My recent favorite is the biography Alexander Hamilton by Rob Chernow about the first Secretary of the Treasury. It’s a fascinating story about the person but also the development of public finance in the U.S. I’ve read a little bit about the interaction between Hamilton and the fourth Secretary, Albert Gallatin. They were driven by very different ideas about how the government should operate and how the Treasury should be used. Hamilton was much more of an activist. When you read about him and his range of interests and the things that he was doing, it’s just remarkable. He was literally inventing public finance in a federal government, and thinking about how expansive – or not – the public finance of the country would be. It’s really remarkable to read that. Gallatin had different interests, different styles, and they were somewhat rivals in the period of time. Hamilton didn’t live very long – I think he died in a duel when he was maybe 47? So there wasn’t that much overlap. But he was already out of the government when Gallatin was running the Treasury. Of course they had different ideas about how things could be done.

How would you characterize President Obama as a leader?

President Obama is a very smart and talented man. I think he has a lot of challenges, particularly right now. There a lot of things that are challenging. Around Thanksgiving, I watched some of the documentaries and history about John F. Kennedy because we just marked the 50th anniversary of his death. The Presidency is always challenging. The things that President Kennedy was doing in the early 60’s, with the Cuban Missile Crisis, the Cold War, were really hard. He had a very tough menu of things. The Vietnam War was becoming a very serious problem for the country. President Obama is a good man, and a very good leader. He has some political challenges. There’s no question about that. I imagine that he’ll look back on his two terms as president and he’ll have quite a bit to point to as accomplishments. When you’re in the moment, sometimes it’s hard to see what those will be, but I think that in history he will get credit for quite a few things.

Is Too Big To Fail really over?

Clearly, the financial crisis put the government in a terrible position of rescuing companies that was very unpopular. I think Dodd Frank is designed to prevent that from occurring again. It’s clearly early days here, but when I look at a lot of the evidence in the markets, I think large institutions today borrow at a higher cost and pay a higher price for being large. A lot of the steps that Dodd-Frank has put in place to require large institutions to hold more capital and more liquidity and have better buffers against failure are designed to reduce the probability of failure. But if an institution fails, right now it is illegal under Dodd-Frank to rescue a single failing institution. And the law requires them to create living wills, which is sort of like a pre-planned bankruptcy. And if that doesn’t work, there’s something called Orderly Liquidation Authority, which the banking regulators would use to wind down a large institution. So, I don’t want to run a real time test to see if we’ve ended Too Big To Fail – better not have that happen. It’s incumbent on all of us to look for evidence that we’ve reduced the probability of failure, and that if failure occurs that we have the right tools in place to handle it. We have tools now that we didn’t have during the financial crisis. There is plenty of debate about this, and I think we probably need to take more time to see how markets evolve. How business models evolve. It’s clearly the case and a measurable thing, that large financial institutions are safer today than they were in 2007, if we look at quantitative evidence.

How does the Financial Stability Oversight Council (FSOC) work?

FSOC is an interesting organization, created under Dodd-Frank. It is a 15-member council that is charged with coordinating financial regulation and making sure that we are properly monitoring the financial system and that there isn’t risk building up that will become systemic and create negative outcomes for the markets and the economy. It’s the first time that we’ve had in the same room all the banking regulators, all the securities regulators, insurance regulation, credit union regulation, housing finance regulation, state securities, state banking regulator – every part of the financial landscape is represented. The FSOC is required to meet quarterly – in fact it’s met more than 30 times in the last 3 years. It’s become a very good forum for talking about the financial system, the real economy, how things are evolving and developing, and it’s a place where there are certain authorities to require large institutions to be subject to more financial oversight, more regulation. While it’s unpopular in the private sector, that the crisis taught us that there were things falling through the cracks, regulatory arbitrage, and there was not a good comprehensive approach to look at things. FSOC is still relatively new, still building a record, building its institutional status. But it’s a very good place to debate these issues, and to get a coordinated approach, instead of fragmented or in a silo, and instead of one regulator looking at a problem, and another looking at it separately, and not talking to each other. You get to better outcomes and streamlined regulation if you have entities talking together. There is a new regulator created by Dodd-Frank called the Consumer Financial Protection Bureau. The intent is to try to get at the abuses that harmed consumers in the crisis. It might have been mortgages that didn’t disclose terms that were damaging to people. Payday lenders are another thing they’re looking at.  Any place where you can coordinate, streamline, and make sure the policies are consistent is important.

What do you enjoy about living in Baltimore?

Baltimore is a really great city. It’s large enough to have a pretty lively arts scene and business community. There’s plenty to do here. But you can live here with a cost of living that is so much lower than in Washington or New York or other big cities. One of the things I’ve done for the government is to travel around the world a bit. You visit these cities of 10 or 20 million people that seem almost unworkable in terms of traffic and it makes you appreciate how easy it is to live here, to get around, to form friendships and communities. We’ve made very good friends in Baltimore, and it’s a small enough city that you can put your roots down and get to know people. So there’s enough going on here, but it’s also an easy place to live. Well it’s definitely a city of neighborhoods. The difference between Fells Point and Hampden and Federal Hill and Station North…it’s just a neat place of different communities. There’s some parts that are quite old and quaint, other parts that are new and edgy. I like that. There’s something for everyone here. When I worked at T. Rowe Price, it was always interesting to me that there was sort of a living choice for someone of every taste. If you wanted something rural, really urban, more suburban, modern, historic, it’s a place that offers all of that. I think it’s great.

Has Baltimore City reached an economic turning point?

It has been challenging to keep up with news about Baltimore because of my job in Washington, even though my home is still there. But I’m encouraged by what I hear about the city’s population growth and signs of reinvestment.  I did a little tour of Baltimore last spring. I brought some people from the Treasury that are working on housing finance over and we met with the Baltimore City Housing Commissioner, who took us all over the Station North area, and then over by Johns Hopkins Medical Center to the East Baltimore Development Corporation. It was really fascinating. He showed me these buildings that are east of where I usually travel. I usually go straight up Calvert Street. But we were east of there, looking at the new Baltimore Design School, for example, which was under construction. We had a good time and learned a lot about some of the local housing issues.

How are your two children doing?

My sons are great. One of the reasons I was able to take on this government job was both of them have finished college – one’s in graduate school, one’s working now. They are both deeply engaged in what they’re doing. I’m proud of both of them. But they’re not going into the financial services as far as I can tell, not following in my footsteps. My older son’s in graduate school working on a PhD in Classics, and wants to go into teaching. He is in his 5th year of a program at Princeton. He’s teaching undergraduates as well as volunteering in the New Jersey prison system, where he teaches inmates who are working towards a community college degree. I think he enjoys the dichotomy of two very different populations – Princeton undergrads and prisoners – and just observing how people learn, and what motivates learning. The enthusiasm he has for teaching and trying to connect with very different kinds of students is impressive.

The other son is working as an actor in Washington, and has been extraordinarily lucky in getting some good roles, and is also teaching playwriting and acting in the school system. So he’s doing exactly what he wants to do. He just finished a touring production of Hamlet, playing Laertes, and is in rehearsal for The Merry Wives of Windsor, both produced by the Chesapeake Shakespeare Company. He loves doing Shakespeare, but he’s also done some other kinds of acting and performance. He’s just busy. There was a show he was in in Tyson’s Corner that I just thought was excellent, called The Pitmen Painters, which is a comedy by Lee Hall. It’s about coal miners in England who became painters after World War I in Ashington. They became a famous painting group. The play has on screens around the stage the actual paintings that they did. They painted about the mines in the town. Quite interesting. I thought it was a really good play.

What are your favorite local charities?

I’m interested in philanthropy generally, and my interests have always been on doing things that are going to help the socioeconomic base of Baltimore, but also in the arts. I don’t think I could pick a favorite local charity, because I’ve been involved in a bunch of different things. One of the things I’ve learned over time – I was on the foundation board of T. Rowe Price for years – is that a great city has to have a cultural life. You can’t attract people to live and work somewhere where there isn’t a life to a city. Some of the things I’ve been involved in have been the BMA, Baltimore Choral Arts, recently I’ve gotten interested in the Chesapeake Shakespeare Theater, which they’re building a new theater in the old Mercantile Bank Building. It’s a great building. They are literally building a replica of the Globe Theater inside of it, which is fantastic. I think you have to make a city interesting, and you have to make it a place where people want to live and work. We’re involved in Teach for America, Catholic Charities, you have to help the city succeed economically, but also provide a reason for people to come here. Baltimore has great sports, terrific teams, people love the Orioles and Ravens, but it also needs great theater, great music, and a place that’s exciting.

What advice would you give young people starting out?

Pay close attention to what you really enjoy doing. Don’t feel like you have to decide anything right away when you’re young. You can try a lot of things. I would suggest testing things — what am I good at? What do I like? What do I procrastinate about? What do I really dread? If you really pay attention I think you can figure out what it is you like doing, and you’ll be much more satisfied if you can find that.

What does your future hold?

That’s a good question. You know, I don’t know. I had such a long and happy career at T. Rowe Price, and then I did something completely different, I’ve been in the government now for four years. I don’t know what my tenure will be in the government, obviously I won’t serve past this administration because I came in with this President. But I’ll have to think about that – I hope there’s an opportunity for another job, but I don’t know what that is yet. I’ve been extraordinarily lucky to do the things that I’ve done. What I’m likely to do is take some time off and think about it – again, do that assessment that I think is good for young people to do. To think about what I really enjoy doing, what I have been drawn to, and what I could do next that will be satisfying.

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