Prof. Andrew Metrick Gives an Insider's View of White House Policymaking

The call, or in this case an email, came early in the morning in April of last year, and by the afternoon, Andrew Metrick, the Theodore Nierenberg Professor of Corporate Governance and professor of finance at Yale SOM, was ready to move to Washington, D.C. Christina Romer, head of the Council of Economic Advisers (CEA) for President Obama, was looking for a senior economist to focus on finance issues, and Metrick, who had been immersed in the financial crisis since before it reached its boiling point, seemed the logical choice. Metrick recounted some of the highlights and lessons he learned from the year he spent working for the CEA to an audience of students on November 15 at a lecture organized by Yale SOM's student government and Finance club.

The path that took Metrick, the faculty director of the Millstein Center for Corporate Governance, from his home at Yale to debating the financial industry reform bill on the grounds of the White House goes through Bear Stearns. When the Wall Street giant collapsed in March of 2008, Metrick was both shocked and shaken. Although he was teaching venture capital at Yale SOM, he had an intimate knowledge of Bear Stearns, as his father had worked there for 20 years. "How could such a large institution go away so quickly?" he asked.

He set about to answer the question, interviewing anyone he could at Bear Stearns, which had been purchased by JPMorgan Chase. He decided to write a book about how fragile investment banks had become. That book, he told the audience, was no longer necessary by September 2008, as the entire world quickly came to understand the fragility of the world banking system. But Metrick had found a new calling, shifting all his work to studying the crisis. "It felt a little like I was working on a cure for cancer," he said.

The work Metrick did in Washington was often an outgrowth of his research into the financial crisis, but not exclusively. He talked about how the CEA writes up analyses of key economic data, such as GDP and retail sales, before the official releases. "One cool thing about the job is that you see in the paper on Saturday something you were working on on Thursday," he said.

But it was the financial reform bill that became Metrick's most important work. He told the students about the internal debates over various policies and explained what he learned by observing key officials such as Treasury Secretary Tim Geithner' Larry Summers, the director of the National Economic Council; and Austan Goolsbee, an old friend of Metrick's who has since taken over for Romer as head of the CEA. "Goolsbee really knows how to pick his battles," Metrick said. "A lot of small things he just let go. You have a limited amount of political capital and he intuitively knows how to spend it. He won some very big battles."

The key part of the financial bill that Metrick worked on was the so-called Volker Rule, a regulation aimed at prohibiting banks from making speculative bets that aren't on behalf of their customers. Even though the bill was shepherded by Treasury, the CEA was consulted often as issues popped up. Metrick said he worked on a memo on financial regulation for two months, analyzing its impact and how it might be implemented. It was during the push toward a final bill that Metrick was promoted from senior economist to the CEA's chief economist, a role that allowed him a tiny office in the Eisenhower Executive Office Building next to the White House.

He called Obama a "fantastic leader" but one who was largely a distant figure to him. Presidents, he said, communicate with staffers below the upper echelon largely through memos. Aides and advisers view these memos as important battlegrounds in which to fight for their points of view. "Sometimes you'd fight really hard to get something into a memo and it comes back and there are notes from [Obama] saying that this is really important," Metrick said. "That really motivates you."

The Restoring American Financial Stability Act of 2010 was signed by President Obama in July and Metrick left his post in August to return to Yale. He is planning new courses on financial institutions and financial regulation informed by his experiences in Washington. "My time in Washington exposed me to many important unanswered questions on financial crises and financial stability, and it is exciting to be back at Yale to focus on this work."