Terry Savage talks money with Diane Swonk
BY TERRY SAVAGE SUN-TIMES COLUMNIST Jul 14, 2006
Updated: May 3, 2013 12:14PM
Originally published: November 28, 2004
You know, for years I’ve been calling this a Santa Claus economy. You get the presents, and the near-term gratification now -- through lower cost for imported goods. But the real costs will come when we have to repay the debt.
On Monday morning, Diane Swonk, 42, one of the nation’s most prominent economists, starts work with only her second employer in an illustrious career.
She will be chief economist and senior managing director of Chicago-based Mesirow Financial, among the most successful and innovative financial services firms in the country.
It’s a long leap from her most recent position as chief economist of Bank One, now merged with JP MorganChase. But Swonk says she never wavered in her determination to stay in Chicago as Bank One disappeared and headquarters shifted to New York, and she jumped at the chance to work in a more entrepreneurial and creative place.
On Chicago and economists
“I had many offers in New York, but I promised myself and my family that I’d stay in Chicago,” she says. “Years ago, everyone said I couldn’t be an economist from Chicago, and be quoted and have access to policymakers. But I proved them wrong. I love this city and the Midwest. It wasn’t time to leave.
“As for choosing Mesirow, I had spent enough time in large-corporate America, and I wanted a place without the bureaucracy of a large company. I wanted to create, instead of constantly fixing problems. I have learned that mega-giant companies don’t give you the freedom to express yourself, and I wanted to create something new, like when I started at First National Bank of Chicago.”
Swonk started her 19-year career at First National, the predecessor of Bank One, as an associate economist in 1985. The previous year, she had earned her degree in economics from the University of Michigan, overcoming dyslexia, and then crammed a two-year masters program in applied economics into just one year before joining the bank. By 1989, she had also completed an MBA with honors in strategic planning and finance from the University of Chicago.
On ‘one great forecast’
Her economic forecasts earned distinction from the get-go. It was Swonk who foresaw the great economic renaissance for the Midwest in 1985, a time when the local economy was still reeling from high interest rates and unemployment in autos and steel.
“One great forecast really sets your whole career,” she muses. But she also credits the bank’s economist at that time, James Annable, for encouraging her.
“He sat me down, and said he wanted me to be the best-known regional economist.” At the time, the bank was led by New Yorker, Barry Sullivan.
Recalls Swonk: “Inside the bank, no one wanted to hear about the opportunities in the Midwest. They certainly didn’t want to hear it from a 24-year-old strawberry blond. But when the forecast made press headlines, they started to believe.”
Swonk has always carved her own path. Her father was an inventory strategist in Detroit, helping GM switch to just-in-time manufacturing. Her mother is an art teacher. She laughs, “All of economics is creative math. Put an engineer and an artist together, and what do you get? An economist!”
On the art of economics
Swonk’s brand of economics, while well received by the financial community (she’s been widely touted as a future Federal Reserve governor), has a distinctively personal and practical approach.
“The art of the economist is not in making forecasts about what the economy will do in the next quarter, but in seeing the subtle shifts that accumulate over time, and change our world,” she says. “If you can figure where the economy will zig instead of zag, you have a tremendous advantage. Every change is a new opportunity, and if you find the new trajectory in an industry or the economy, there’s a real opportunity to profit.”
Shifts that might be subtle to most, are obvious to Swonk. In the 1990s, she was among the first to recognize the productivity boom, because of her experience in watching the Midwest restructure and cut costs a few years earlier.
“That changed the rules of monetary policy, because it [the restructuring] showed we could have growth with low inflation, and without raising interest rates [to control growth]. We understood that early.”
On the current outlook
Here are some of the “subtle shifts” she’s watching now:
“China is a big shift, not only their growth but their eventual move to revalue their currency, and trade against other currencies. It will have a huge impact on the U.S. economy at some point in time.
“And along that line, the potential for the United States’ dollar to lose its status as the world’s reserve currency will be a major shift. Greenspan’s words earlier this month were a warning shot across the bow. We aren’t seeing higher interest rates and inflation yet, but that will come later.
“You know, for years I’ve been calling this a Santa Claus economy. You get the presents, and the near-term gratification now -- through lower cost for imported goods. But the real costs will come later, when we have to repay the debt.”
Despite those warnings, Swonk is very optimistic about the economy for the next few years.
“Our recent sub-par recovery sets the stage for a longer period of prosperity like the 1990s,” she says. “Once this spurt in oil prices works its way through the economy, you won’t see inflation pick up as soon as many are expecting. The upside for profits and economic growth is going to be strong in the next few years.
“The economy surprised us by its ability to survive, and now it will surprise us by its ability to thrive.”
On her personal side
Swonk peppers her conversation with references to her two young children. The divorced mother of two lives in the north suburbs, where she’s teaching her children some of the lessons she learned from her own parents:
“My dad told me never to bet more than you’re willing to lose,” she says. “He lost a lot of money in the markets and in silver in 1980-81 -- money he had worked hard to earn. And my mother was always cautious, keeping the cupboard full of food in case of emergency.”
Her children’s allowances include “incentives for saving,” such as matching their savings account deposits dollar-for-dollar.
Her 10-year-old daughter was elected to the student council after running on a platform that promised students’ money would be safe because she’s “good at math, and Mom taught me economics.”
Her seven-year-old son was born on Veteran’s day -- a bank holiday, Swonk notes, allowing her to be back at work quickly.
Swonk gives credit to the other women in her life, who help her handle all the responsibilities. Maria Lichterman is her “Mary Poppins” at home hand-ling the household chores, and she’ll be joined at Mesirow by her right hand, Olga Camargo-Alvarez.
In fact, she shows me offices with a view Mesirow is building for her at headquarters, 350 N. Clark.
On the opportunity ahead
“Jim Tyree and I did this deal on a handshake just three weeks after we started talking,” she says. “He’s so high-energy, we clicked immediately. He showed me this immense opportunity to support his business lines -- investment management, corporate finance, real estate, insurance and consulting -- by providing creative solutions. It’s an opportunity to do all that, and contribute to expanding Mesirow’s presence. It was just too attractive to resist.”
And if the Fed comes calling?
“There’s no question that at some point I’d like to be more involved with the Fed,” she says. “But that’s down the road. If it does come up later, Jim and I recognize that it will be an extraordinary opportunity for both of us: a validation of what we can accomplish here.”
Terry Savage is a registered investment adviser, and appears weekly on WMAQ-Channel 5’s newscasts. Her column appears every Thursday in the Chicago Sun-Times.
Tyree’s acquisitions guide Mesirow to impressive growth
James C. Tyree, 47, joined Chicago-based Mesirow Financial in 1980 as a securities analyst. He rose quickly to become a partner in the employee-owned firm, and in the past decade has transformed the 67-year-old firm into a highly regarded and fast-growing financial services provider to high net worth individuals, corporations and institutions.
Along the way, Tyree has become an active civic leader, honored by many organizations.
With annual revenues of more than $350 million, 1,000 employees and 18 offices, Mesirow is involved in fields ranging from investment management, investment services and real estate to investment banking, insurance services and consulting.
Although a privately held company, Mesirow opens its books to reveal an outstanding track record. One measure: Total assets under management grew to $20 billion this year, up 41 percent from the previous year.
Tyree has led this growth through a series of more than 40 acquisitions, primarily of successful entrepreneurial businesses.
Well-known Chicago real estate developer Richard Stein (who built the AT&T building among others) joined up with Mesirow in 1996. In the last year, Mesirow acquired the insurance brokerage operations of Near North Insurance. Most recently, Mesirow acquired the U.S. corporate recovery practice of KMPG LLP.
When speaking of his latest hire, his new chief economist, Diane Swonk, Tyree beams: “We knew each other through the Executives’ Club of Chicago, and I’ve heard her speak, and I read her book (The Passionate Economist, Wiley & Sons, 2003). I think she’s a terrific economist, because she has great, effective ideas, and because she can communicate them well on a personal basis.
“She’ll support all our businesses with strong economic information, from forecasts used in investment management to global strategies used by our consulting group. ... Very simply, she’s the best in the business.”