Summer 2008 News and Views for Eighth District Bankers By Michelle Neely Eighth District banks a nd their national peers continu e to ace pressure on earning s amid r is- ing asset qual ity problems and weakness in the regional and national ec onomies. First-quarterresults il lustrate these pressures, yet indicate that banks in the Distr ict have be en remarkably resilient thus ar. Return on average assets (ROA ) increased slightly in th e rst q uarter at District banks. They posted an average ROA o0.96 percent compared with 0.94 percent at year- end 2007 . The Distr ict’s rst-quarter perormance substantially exceeded that oU .S. peer banks (ba nks with average assets oless than $15 billion), which, as a group, recorded an average ROA o0.81 percent. RO A or both sets obanks is down markedly rom year-ago levels, though the drop at peer banks is more subs tantial at 36 basis points. Dstrct Banks: Profts Steady , But Problem Loans Mount w w w . s t l o u i s f e d . o r g 1 inSide : 2 •What We’re Learning from the Subprime Mortgage Crisis •St. Louis Fed’s Check Restructuring Speeds Up 3 •The Past, Present and Future of the U.S. Mortgage Market 5 •Housing and the ‘R’ Word 6 •Central BankerCoverage Is Expanding Online •Subscribe to Central BankerNew Presdent Bullard Bullsh on Economcs continued on Page 4 T oo oten, says new St. Louis Fed President Jim Bullard, economics is regarded as a mere college subject. “Many people think economics is too com- plicated. Not everyone goes to co llege ; so, not everyone gets it—even though they live with the consequences osupply and demand every day, ” Bulla rd says. “We live in a market system, and people need to understand how that system works. ” Bullard, who succeeded Bill Poole as presi - dent April 1, is an advocate othe power oeco- nomic ideas and nanc ial literacy. He pursued those ideals through 18 years ostudy in the St. Louis Fed’s Research division, as well as through proessio nal a ssociatio ns and speaking engagements. Since joining th e Fed, Bullard has al ready spread this message to many groups in the Eighth District. He’s also well-versed on monetary policy, hav- ing worked closely with Poole on briengs beore each Federal Open Market Committee meeting. Bullard ’s expertise in monetar y policy and amil- iarity with FOMC procedures are among the many reasons why he was tapped or the job. “I’ve seen many othe events othe recent years rom the inside out, including the Asian cur- rency crisis, the bursting othe tech bubble and the S&L predi cament. By in timately kno wing monetary policy, I’m not coming in cold during a time when the situation is very tense,” he says. “It’ s act ual ly the most tense it’s been since 1980. ” The key thing or commercial bankers to keep in mind, Bullard says, is that the U.S. economy is resilient and has weathered many shocks over the years. “We’ll get throug h this one as well. The economy continues to surprise at how it adapts and comes back,” he says. Bullard, 47, was appointed president by the St. Louis Fed’s Board oDirectors ateran extensive search and was approved by the Fed’s Board oGov- ernors. T o read Bul- lard’s ull biography, see www.stlouised.org/ news/press_room/ bios.html#bullard. n