What’s better, a pension or a 401(k)?

Summary

Marketplace Podcast Summary: "What’s Better, a Pension or a 401(k)?"

Release Date: October 24, 2024
Host: Kai Ryssdal
Reporter: Mitchell Hartman
Duration: Approx. 24 minutes

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Introduction: The Shift from Pensions to 401(k) Plans

In this episode, Kai Ryssdal explores the ongoing debate between traditional defined benefit pension plans and defined contribution 401(k) plans, especially in the context of recent labor movements and corporate strategies.

Boeing's Financial Struggles and the Pension Debate

[00:00 – 02:16]
Kai Ryssdal opens the discussion by highlighting Boeing's turbulent week, marked by a $6.2 billion quarterly loss and a significant strike by over 30,000 machinists. The primary demands of the striking workers include better pay, benefits, and a return to defined benefit pension plans, which Boeing had abandoned a decade ago in favor of 401(k)s.

Understanding Pensions vs. 401(k)s

[02:16 – 03:56]
Mitchell Hartman provides a primer on the two retirement plans:

• Defined Benefit (Pension) Plans: Funded solely by employers, these plans guarantee lifetime retirement benefits but place financial responsibility on employers.

• Defined Contribution (401(k)) Plans: Funded by both employers and employees, these plans shift investment risks to workers, as they manage their retirement funds without guaranteed payouts.

Teresa Ghilarducci, a retirement expert at the New School, emphasizes the uncertainties faced by workers with 401(k)s:

"[401(k) plans] do not guarantee a stream of income for the rest of your life. People are filled with stress having to manage their nest egg."
[03:02]

Alicia Munnell from Boston College counters by outlining the disadvantages of pensions:

"In the private sector, pension benefits typically aren't indexed to inflation, which has soared in recent years."
[03:25]
She also addresses fears about pension fund solvency, with Monique Morrissey from the Economic Policy Institute reassuring that concerns are often overstated, especially in the public sector.

The Current Retirement Crisis

[03:56 – 04:22]
Experts agree that the most pressing issue is the lack of adequate retirement plans for millions of workers beyond Social Security. Many do not have access to either 401(k)s or pension plans, leaving them vulnerable in retirement.

Catastrophe Bonds: Investing in Climate Risk

[04:22 – 08:42]
The episode shifts focus to the growing market of catastrophe bonds (cat bonds), financial instruments designed to transfer risks from extreme weather events to investors. Teresa Ghilarducci explains that these bonds offer higher returns (around 11%) and diversification benefits since they are uncorrelated with traditional financial markets.

Chris Grimes from Fitch Ratings discusses the impact of recent hurricanes on cat bond investments, noting initial price drops but expecting stabilization as more data becomes available.

Cliff Rossi from the University of Maryland underscores the importance of cat bonds in stabilizing the insurance industry, though he cautions that the current market size may not suffice to address the increasing frequency of climate-related disasters.

Private Equity's Involvement in Skilled Trades

[09:16 – 14:05]
Mitchell Hartman introduces a trend where private equity firms are increasingly investing in skilled trades such as HVAC, plumbing, and electrical companies. Alicia Munnell explains that private equity is targeting fragmented, often smaller businesses to consolidate and improve efficiencies.

The segment delves into the experiences of business owners like Dana Spears from Florida, who feel pressured to sell to larger investors despite personal reservations. The discussion also touches on the potential impacts on customers and service quality post-acquisition.

Housing Market: The Rise of Fixer-Uppers

[14:05 – 19:00]
The podcast examines the housing market dynamics, particularly the surge in sales of fixer-upper homes. Stephanie Hughes highlights stories like Corita Stahl from Baltimore, who faces the dilemma of purchasing a home in disrepair due to rising home prices.

Jonathan Miller from Miller Samuel notes a shift in buyer preferences driven by scarcity in move-in-ready homes. Nadia Evangelou, a senior economist with the National Association of Realtors, points out the increased renovation costs, complicating the attractiveness of fixer-uppers.

Revitalizing Local Businesses: The San Luis People's Market

[19:00 – 23:52]
A heartening story from San Luis, Colorado, showcases the transformation of the historic R and R Market into the San Luis People's Market. Chris Grimes narrates the extensive renovations and the community-centric vision of Devon Pena, aiming to make the market a hub for local produce and cultural diversity.

The segment highlights efforts to engage younger generations through internships and the challenges posed by demographic gaps in the workforce.

Preview of Upcoming Stories and Conclusion

[23:52 – 24:53]
In closing, Mitchell Hartman previews an upcoming story on the Federal Reserve's political independence, featuring insights from Daniel Tarullo of Harvard Law. The episode wraps up with standard Marketplace sign-offs and calls for listener support.

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Notable Quotes

• Teresa Ghilarducci on 401(k) uncertainties:

  "[401(k) plans] do not guarantee a stream of income for the rest of your life. People are filled with stress having to manage their nest egg."
  [03:02]

• Alicia Munnell on pension disadvantages:

  "In the private sector, pension benefits typically aren't indexed to inflation, which has soared in recent years."
  [03:25]

• Cliff Rossi on the importance of cat bonds:

  "Cat bonds play an important role in stabilizing the insurance industry."
  [08:29]

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Conclusion

The episode provides a comprehensive exploration of the retirement landscape, contrasting the security of pensions with the flexibility—and risks—of 401(k)s. It contextualizes this debate within broader economic and labor trends, including corporate financial struggles, investment strategies in the face of climate change, and shifts in the housing market. By interweaving expert analyses, real-world examples, and poignant quotes, Marketplace delivers a nuanced understanding of these critical financial issues affecting everyday Americans.

Transcript

[Kai Ryssdal]

This Marketplace podcast is supported by Remarkable. Are you still taking notes on paper? Change the way you work with Remarkable Paper Pro, a premium digital notebook with the feel of paper for taking notes, reviewing documents and getting organized. Get the digital tools you need for your workday without any distractions and stay focused with a unique color display that reflects natural light. It's portable, practical and professional. Get yours [e-mail] thanks to tax reform.

[Mitchell Hartman]

American businesses have opened doors across our communities, investing in manufacturing workers and equipment, spurring millions of new jobs with higher wages and better training, and setting a new record high in corporate taxes paid to the US Government. America's businesses open doors. Tell Congress to keep the door of opportunity open, Protect and strengthen tax reform Paid for by Business Roundtable hey, you are saving for retirement, right? From American Public Media, this is Marketplace in Los Angeles. I'm Kai Rysnal. It is Thursday today, the 24th of October. Good as always to have you along, everybody. This has been a terrible, horrible, no good, very bad week for the Boeing Company. There was that $6.2 billion quarterly flood of red ink the planemaker announced yesterday morning. And then last night, the more than 30,000 machinists who've been on strike for almost a month and a half now voted to stay out. Better pay and benefits are part of what the union wants. Also, though, retirement plans, specifically a return to defined benefit pension plans, which the company suspended 10 years ago in fav of contributing to employees. Defined contribution plans, 401ks. In other words, that shift in the private sector from pensions to 401ks has been going on for decades. But as organized labor has been having its moment of late, workers and unions are pushing back. Marketplace's Mitchell Hartman has this pension and 401k plan primer.

[Kai Ryssdal]

Broadly speaking, defined benefit or pension plans are funded by employers and pay retirement benefits for life. Defined contribution or 401k plans are usually funded by the employer and employee, and the employee then manages the investments for as long as they last. Pensions put financial pressure and risk on employers to fund and manage them. Because 401 s put that pressure mostly on workers. They've become more popular with employers. But now there's pushback led by unions.

[Teresa Ghilarducci]

I am not surprised that the Boeing.

[Mitchell Hartman]

Workers rejected the contract.

[Kai Ryssdal]

Teresa Ghilarducci studies retirement at the New School. She says workers increasingly understand the risk inherent in 401ks.

[Teresa Ghilarducci]

A 401k plan does not guarantee a stream of income for the rest of your life. People are filled with stress having to manage their nest egg.

[Kai Ryssdal]

But pensions have disadvantages, too, says Alicia Munnell at the center for Retirement Research at Boston College.

[Mitchell Hartman]

I am surprised with the enthusiasm for.

[Kai Ryssdal]

Defined benefit plans, munnell says. In the private sector, pension benefits typically aren't indexed to inflation, which has soared in recent years.

[Mitchell Hartman]

And the key loser was people who had defined benefit plans that did not keep pace.

[Kai Ryssdal]

Another ding against pensions is the fear the employer sponsor will go belly up. Monique Morrissey at the Economic Policy Institute says that concern is overblown.

[Teresa Ghilarducci]

In the private sector, benefits are guaranteed.

[Alicia Munnell]

By the Pension Benefit Guarantee Corporation.

[Kai Ryssdal]

In the public sector, pension funds come from government coffers. And Morrissey says one way to balance the budget is by not contributing the.

[Teresa Ghilarducci]

Full amount to the pension.

[Kai Ryssdal]

All the experts I talked to agreed that the biggest problem today is that aside from Social Security, millions of workers don't have any plan 401k or pension to help pay their bills in retirement. I'm Mitchell Hartman for Marketplace on Wall street today.

[Mitchell Hartman]

Boeing off a bit. Bond yields took a breather. The major indices mixed. We will have the details when we do the numbers. Turns out there is in fact a market for everything, including climate change. As more extreme weather happens more often, what are called catastrophe bonds are on track for a record year. The website Artemis counts more than $13 billion in new cat bonds so far this year, with the total market now approaching $48 billion. Born after Hurricane Andrew back in the 1990s, Cat bonds are a way for governments and insurance companies to spread some of their risk from major disasters to the capital markets. And they are also a way for investors to profit from that risk. So after Hurricanes Helene and Milton, we asked Marketplace's Amy Scott for an update on the cat bond market.

[Teresa Ghilarducci]

Investors like catastrophe bonds for two main reasons. First, they tend to pay a higher return than traditional bonds, around 11% recently because they're riskier.

[Alicia Munnell]

The returns have been good over the.

[Kai Ryssdal]

Last few years, and that always helps.

[Teresa Ghilarducci]

That's Steve Evans, who tracks the market as editor in chief at Artemis. More importantly, he says, cat bonds offer investors a form of diversification. They don't move in tandem with stocks or other assets.

[Kai Ryssdal]

They are very disconnected from broader financial markets.

[Amy Scott]

And so for investors, they're seen as an attractive alternative.

[Alicia Munnell]

The that can deliver them some income.

[Kai Ryssdal]

Through times when perhaps other asset classes are more volatile.

[Teresa Ghilarducci]

Here's how they work. An insurance or reinsurance company, or sometimes a government will sponsor a bond covering losses from a specific event or events, like named tropical storms in the Atlantic or US Wildfires or European windstorms. Investors in the bond pay into a trust that the sponsor can only access if the event happens and meets certain thresholds like total insured losses or specific wind speeds and the bond gets triggered. If it does, investors can lose part or all of their money, and if.

[Chris Grimes]

The event doesn't transpire, that the investors would get their money back plus interest.

[Teresa Ghilarducci]

Chris Grimes follows the market for Fitch Ratings. He says it's too soon to know if hurricanes Helene and Milton will trigger significant losses for cat bond investors as insurers begin to process claims. As with other bonds after they're issued, catastrophe bonds are traded in a secondary market. And Grimes says prices in that market initially fell by 10 to 30% for a handful of bonds, suggesting investors expect some losses.

[Chris Grimes]

Typically, what happens with events like this.

[Mitchell Hartman]

Is you see an initial markdown and then as more clarity arises over the.

[Chris Grimes]

Following weeks and months, you'll see the bond prices react to the new knowledge.

[Mitchell Hartman]

About the actual securities themselves.

[Teresa Ghilarducci]

As of this week, Artemis estimates damage from Hurricane Milton might trigger investor losses in the low $100 million. And when insurers issue new catastrophe bonds in the coming months, Grimes says they may have to pay a higher premium to attract new investors.

[Mitchell Hartman]

I would expect that pricing would reflect the greater loss activity that we just.

[Chris Grimes]

Experienced over the last couple of weeks.

[Teresa Ghilarducci]

And that could be passed on to insurance customers. One reason for the rising cost of homeowners insurance in the past few years is that reinsurance, including catastrophe bonds, has become more expensive. Cliff Rossi is an expert in risk management at the University of Maryland. He says cat bonds play an important role in stabilizing the insurance industry.

[Kai Ryssdal]

But the market as I see it.

[Mitchell Hartman]

Today is still not large enough to.

[Kai Ryssdal]

Be able to keep up with the pace of extreme weather events that we're starting to see. With these back to back hurricanes, for.

[Teresa Ghilarducci]

Example, how much the cat bond market will grow depends on how willing investors are to keep risking their money as climate catastrophes stack up. I'm Amy Scott for Marketplace.

[Mitchell Hartman]

You hear stories all the time about private equity groups buying up companies in a particular industry. Media, healthcare, you name it, right? A story in the Wall Street Journal the other day caught my eye though. A new trend in private equity pouring money into the skilled trades. Think plumbers and H Vac. Th Ping Chen did the reporting on it. Thanks for coming on the show.

[Alicia Munnell]

Thanks for having me.

[Mitchell Hartman]

First of all, who's getting bought up in these trades?

[Alicia Munnell]

Well, there's a lot of interest in the skilled trades, but it's especially concentrated in H Vac companies, plumbing and electrical.

[Mitchell Hartman]

Who's doing the buying?

[Alicia Munnell]

A Ton of folk in private equity. So you might think about private equity as typically going after the bigger fish. This is a moment where we're seeing a lot of companies, bigger and smaller, going after companies in the skilled trades, really of all sizes.

[Mitchell Hartman]

One does not usually hear, though, of private equity going after the skilled trades in these kinds of generally smaller companies. Right. They buy the big ones, they get scale and they take them apart and extract profit and then they move on. What is going on here?

[Alicia Munnell]

Well, when we're talking about the home services industry, it's really fragmented. We're talking a lot of mom and pop shops, companies that were started maybe by a worker who was maybe out in the field before and started their own company and built it up, and now they've got a couple million dollars in revenue. And companies that are looking to kind of build these bigger entities, what they can do is they can come in, they can build through, starting with maybe one kind of anchor company, right, A big plumbing company, and then add on lots of littler outfits and sort of roll them up and the ide, you improve the margins, the efficiencies, you build these bigger, sort of more productive entities.

[Mitchell Hartman]

What is happening to these companies after they get sold or bought, depending on your perspective? I mean, do the owners stay on? Do the people who built these companies get to participate or what happens?

[Alicia Munnell]

Well, there's really a range, of course. But something that's interesting is that in recent years, if we were talking say a decade ago, you would have seen a lot more owners of these companies who just wanted to sell, retire right after the sunset. And what we're seeing more these days is owners who actually want to stick around and build up their companies. So a lot of them stay, do stay with the company, at least for a few years. That's something that private equity likes, of course, for stability. Often, conversely, though, you do have owners who have stories about really getting told that they would be able to stay and still have authority and decision making power and have found that that's not been the case. So it's hard to generalize. But certainly there is interest often in owners to stay and often that's very beneficial to the buyers.

[Mitchell Hartman]

One of the other that's happening here, though, is that the landscape of these industries is changing so quickly that in your telling, in this piece, the owners don't really have a choice. I want you to tell me about Dana Spears. She's down in Florida, runs or ran, I suppose, an H Vac company.

[Alicia Munnell]

Yeah. So Dana Spears, she started building this company up and she, she found, as many owners did find, especially during the pandemic, that there was just increasing interest in folk knocking on her door wanting to buy her company and she didn't want to sell. She had employees that had with her for 16 years and she was worried, as many owners do, fear that someone was going to come in, buy the company and essentially kick out a bunch of employees, hire cheaper ones, et cetera. And so she, she didn't want to sell but eventually found really that the people around her were all selling. Eventually she really started to feel like she was being outgunned because if you think about the folk who do have private equity come in and buy them, they end up with more money. They can negotiate better deals on equipment, fleet things like healthcare, sometimes can pay better. Wa. And so for her it was really just this feeling of this is kind of inevitable and it might not be something I want to do. But also they are offering a lot of money right now and it is an opportunity.

[Mitchell Hartman]

Can we talk about customers here for a second? And I'm not saying that, you know my local plumber who I've been calling now for how long have I had my house? 15 years. I've been calling the same company for like 15 years. What's going to happen to the service part of these service industries? Are consumers going to do better or maybe even not worse? Right. Is the best to be hoped for?

[Alicia Munnell]

Yeah, that's a great question. And I think jury is still out. I will say there are certainly plenty of cases of customers who say, look, the company I use got sold and all of a sudden they're sending in service techs who don't know as much. Conference. He'll talk to customers too. To say my company got sold and I fast response time. So as with everything, I mean it's going to be something of a mixed bag.

[Mitchell Hartman]

Tepping Chen at the Journal talking about the skilled trades in private equity. Not a combination you hear too often. Tuping. Thanks a lot for your time. Interesting piece.

[Alicia Munnell]

Thank you.

[Mitchell Hartman]

Coming up, there's this demographic gap between 18 and 50 year olds. They're not here. Demography is destiny, you know. First though, let's do the numbers. Dow industrials down 140 points today, a third of 1%. 42,374. The NASDAQ gained 138 points, 3/4%, 18,415. The S&P 500 picked up 12 points. 2 10% 58 and 9. Mitchell was just telling us about the comparison between pensions and 401k plans. So in some 401k related stocks, T. Rowe Price found 2 and 3 10% today. Bank of America, which if you remember the financial crisis owns Merrill lynch, pocketed 7, 10%. Boeing, whose workers want pensions instead of 401ks, down 1.2% today. Tesla, the EV maker reported revenue of more than $25 billion yesterday. Earnings are forecast to rise this year. Tesla sped up 21 and 910 of 1%. Bonds up yield on the 10 year T note down 4.21%. You're listening to Marketplace. You've turned to Marketplace for up to the minute news for stories that show you the connections between global events and your personal economy. And you're not alone. Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact based journalism freely accessible and Marketplace investors make it all possible. Your year end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day. So please contribute what you can [e-mail] donate. This is Marketplace. I'm Kai Ryssdal. The Census Bureau told us this morning sales of new homes in this economy are doing pretty well, the best in a year and a half. In September, used homes, existing homes is the preferred phrase, not quite so good. Data out yesterday from the national association of Realtors. We mentioned this, those sales in September, the lowest they've been in 14 years. That said, there was some anecdotal hope for our housing future. In the Federal Reserve's Beige book, also out yesterday, the Fed noted housing inventory is expanding across the country. And the Richmond Fed in particular cited an agent in Virginia who was specifically seeing a rise. And this is a quote, a rise in fixer uppers and less than ideal homes entering the market. Marketplace's Stephanie Hughes is on housing for us today.

[Stephanie Hughes]

The house that Corita Stahl's renting right now in Baltimore has some issues. Take the toilet in its only bathroom. It's never been good at flushing, we often have to bucket flush on top of regular flushing. Stahl is a special education teacher and a single mom with four sons at home. The house, busted toilet and all, is about to go on the market and Stahl is hoping to buy it, even though she says she's not really the fixer upper type.

[Kai Ryssdal]

I have to find a place for.

[Stephanie Hughes]

Us to be and that is a fixer upper in this market. Homes that are probably livable but need giant helpings of TLC haven't been of much interest to buyers since the pandemic. That's according to Jonathan Miller, who leads Miller Samuel, a real estate appraisal and consulting firm. Buyers have wanted what they wanted and.

[Mitchell Hartman]

Right away immediate gratification wasn't fast enough.

[Stephanie Hughes]

But Miller says now there aren't enough houses on the market that are move in ready.

[Kai Ryssdal]

And so I would think that the.

[Mitchell Hartman]

Fixer up market is there's a little.

[Kai Ryssdal]

Bit more supply than we would typically expect.

[Stephanie Hughes]

Meanwhile, the median price for an existing home was up 3% from last year in September, the 15th consecutive month of year over year increases that makes people more willing to deal with a toilet that doesn't flush. Nadia Evangelou is a senior economist with the national association of Realtors.

[Mitchell Hartman]

Many buyers are turning to homes that need renovation as a way to enter the market at a lower price point.

[Stephanie Hughes]

But Evangelo points out the cost of renovating has surged in the past few years. Prices of building materials have gone up, as have wages for people who do the building.

[Mitchell Hartman]

It may look like a better solution.

[Stephanie Hughes]

The fixer upper, but sometimes when you don't add the renovation cost, then it.

[Mitchell Hartman]

Can go over like the budget.

[Stephanie Hughes]

And we have seen that many times.

[Mitchell Hartman]

As well, personally speaking as well.

[Stephanie Hughes]

Evangela bought her house in Virginia in 2018. She did some interior work right away with a plan to fix up the outside. Eventually, she says, six years later, those fixes are still waiting. I'm Stephanie Hughes for Marketplace.

[Mitchell Hartman]

Now a story about another kind of fixer upper, a small business that's getting new life in San Luis, Colorado, near the New Mexico border. The R and R market first opened in 1857. It is that state's oldest continuously run business. About 600 people live in town, and the market was the kind of place you could pop in to buy a cold soda or a birthday card, bump into a neighbor, talk about the weather, what have you. Ownership had been in the same family till just a couple of years ago, when a local nonprofit bought the old adobe building. And with new management, of course, has come a new vision and a new name, the San Luis People's Market. Colorado Public Radio's Dan Boyce toured the renovations.

[Chris Grimes]

The original wall of the market in San Luis is made up of exposed earthen bricks that date back 167 years.

[Amy Scott]

You see those cracks?

[Chris Grimes]

The building wears its history. There are scorch marks from a fire in the 1940s.

[Mitchell Hartman]

Scratch it and smell the burnt ash.

[Chris Grimes]

That's Devon Pena, a college professor and the store's new executive director. He's a stocky man wearing a black ball cap that reads San Luis People's Market.

[Mitchell Hartman]

We gotta clean that up so we.

[Amy Scott]

Can plug these holes up, cut the ancient sewage pipes which are non functional.

[Chris Grimes]

The old market was a general store that sold some limited groceries and hardware. Now the building needs a lot of work before it can get up and running again. It has seen better days. That's actually true of much of this little western town. Market general manager Lynette Ramirez points out many San Luis buildings are in rough shape.

[Mitchell Hartman]

It feels good to be one of.

[Teresa Ghilarducci]

The first buildings brought up to standards. Now that may continue another 167 years into the future.

[Chris Grimes]

San Luis is Colorado's oldest town and has a rich agricultural heritage. But the population is shrinking and aging. The last family owners of the market retired in 2022 and had no family who wanted to take over. So Pena bought the place with the help of about $3 million in grants and private funding. He wants the market to become a community pole.

[Mitchell Hartman]

You can't sustain up a business model unless you become a destination.

[Chris Grimes]

The San Luis People's Market will be a food co op with the sort of fare the old market never had. Like roasted chicken from a brand new rotisserie.

[Mitchell Hartman]

Cuz there's never been one in town and everybody would love one.

[Chris Grimes]

Fresh soups with local ingredients, salad greens and herbs from a greenhouse out back. And Ramirez hopes the store's shelves will be stocked with produce raised by the community who would share in the profits.

[Teresa Ghilarducci]

So if we can get them producing food, even a little bit that can be sold into the market, then I won't have to order it from another state.

[Chris Grimes]

It's a grand vision, but one that requires employees and working age. People are kind of hard to come by in this remote high desert region. Pena calls it his next generation problem.

[Mitchell Hartman]

And that's the one that's got us a little bit stumped. There's this demographic gap between 18 and 50 year olds. They're not here.

[Chris Grimes]

He's trying to solve that through paid internships. Three local high schoolers are washing baskets of produce. They're working out of another local building until the market reopens this fall. They're learning how to prepare salads and prickly pear cactus ice cream to serve at a community dinner.

[Mitchell Hartman]

We've learned foods I can't even pronounce, foods I never even heard of.

[Chris Grimes]

16 year old Sapphira Rael holds up some purslane. It's a small succulent. Pena and Ramirez have had them growing crops like this from seeds and then making dishes infused with indigenous and Hispanic tradition.

[Mitchell Hartman]

It's not even Spanish.

[Chris Grimes]

I ask Raelle if learning to farm these heritage crops and learning to prepare these culturally rich meals, if that makes her want to stay and be part of the San Luis people's market.

[Mitchell Hartman]

Well, it depends.

[Chris Grimes]

As of now, Rael wants to get out of San Luis, see the world.

[Mitchell Hartman]

I want to go be a traveling nurse or a flight attendant with my cousin.

[Chris Grimes]

But hey, she has a couple years of high school left. And in that time, Pena is hoping a revitalized old market becomes a new centerpiece in town, maybe part of a local farming movement, something worth sticking around for. In San Luis, Colorado, I'm Dan Boyce for Marketplace.

[Mitchell Hartman]

This final note on the way out today. I'm off the show tomorrow, traveling to Boston for an event at wbur, but we've got a piece airing on Monday that I wanted to do, a little preview of, a story on the Federal Reserve and the politics of this economy. I went to Harvard last month to visit Daniel Tarullo, now on faculty at Harvard Law, but before that he was a member of the Fed Board of Governors. I couldn't help but notice as I was getting ready to come talk to you, that you're teaching a seminar this fall at the law school. It's called the Federal Reserve Legal and Policy Issues. Students may, as it happens, complete a research paper that would satisfy the analytical paper requirement at the Harvard Law School. So they've got that going for them. A theme running through the course quoting here will be the impact of the financial crisis of 2007, 2009, in reawakening political controversy over the Fed's operation and functions. It is, you say, the nation's central bank, and it is also statutorily and customarily independent. Why are you teaching that course?

[Amy Scott]

Oh, well, there are a couple of reasons, I guess. Three reasons probably. One, not surprisingly, I'm interested in it, having been on the Fed. Two, the students are incredibly interested in it. I mean, I have been frankly surprised at the length of the waiting lists. But that probably derives from the third reason, which is because of the financial crisis, because of issues around banking regulation, because of the reappearance of inflation. Over the last few years, it's become front and center again in public debate in a way that it really wasn't for a while during the Greenspan period.

[Mitchell Hartman]

Interestingly, you didn't say anything about the politicization of the Fed right there.

[Amy Scott]

Well, I don't think the Fed has been politicized within the Fed, and that's one of the things that I value about the Fed still, because in a period in which partisan divide is so sharp, the Fed is able to put together a consensus position that has some staying power, and that's regardless of whether Democrats or Republicans have appointed they various members. The members of the Board of governors come in with different views and they maintain different views. But it is an institution which continues to operate in a fairly collegial manner in which things are debated back and forth seriously and which people try to come to a position which is good for the country, but also can have some durability so that you don't get these sharp swings that we see in areas like environmental policy.

[Mitchell Hartman]

Much more on the Fed and its political independence coming up on this program on Monday. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Petra and Stephanie Sieck are the Marketplace editing staff. Amir Bibawe is the managing editor. I'm Kyle Rizdal. We will see you tomorrow, everybody. This is apm. You turn to Marketplace for up to the minute news for stories that show you the connections between global events and your personal economy. And you're not alone. Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact based journalism freely accessible and Marketplace investors make it all possible. Your year end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day. So please contribute what you can [e-mail] donate.