PDF2007 Fall TEN Magazine
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PHOTO BY JOSHUA LAWTON JOSHUA BY PHOTO On The Fall 2007 Cover: COMMON THREADS: DESIRABLE COMMUNITIES WOVEN BY THOSE WILLING TO PAY MORE FOR A HIGH QUALITY OF LIFE ................................ 4 U.S. residents increasingly want to live where the weather is mild year-round, or near the beach and mountains––and they’re willing to give up things to do so. FEATURES CHANGING BANKING STRUCTURE: As COMMUNITY BANKS EVOLVE, THEIR EMPHASIS ON CUSTOMER SERVICE REMAINS ...........12 Community banks in rural areas have transformed significantly during the past few decades, particularly as they move, expand, or add branch offices. HOMEMADE: ECONOMIC DEVELOPMENT EFFORTS FOCUS ON LOCALS ............................................................................16 By creating the right environment, communities can benefit existing businesses while attracting new ones. HOUSING, HOUSING FINANCE & MONETARY POLICY: THE 2007 JACKSON HOLE SYMPOSIUM .................................................... 22 The 31st annual symposium hosted by the Federal Reserve Bank of Kansas City focuses on the causes of housing changes and the economic implications. EMERGING PAYMENTS: SUccEss DEPENds ON ABILITY TO CONTROL THREATS, MISUSE .................................................... 28 Your ways to pay––products, services, rules and technologies––are all changing. So are the tools and techniques to mitigate the risk. IN EVERY ISSUE 1 PRESIDent’S MESSAGE 32 About…ROBERT LATHAM OWEN 36 NOTES President’s message Practical productivity growth s part of the Federal Reserve’s the economy. Those monetary policy mission, we who regularly follow A regularly talk with business people the financial media from throughout the Tenth Federal know, almost regardless Reserve District to learn about what of the topic or speaker, is occurring in their specific industries any discussion on the and markets. economic outlook makes Although we continually monitor some reference to how economic data, experience has taught much more productive us that a more thorough and timely we are than we were at understanding of current and developing some past time, be it last economic conditions comes from talking quarter or a decade ago. with those involved directly in the business Although worker productivity can and industry of our District. These be measured in terms such as output discussions—including meetings with our per worker, relating the data to what is Board of Directors—may take many forms happening in the real world can prove ranging from phone calls to roundtable difficult. Productivity growth of 1 or 2 meetings, but they are most beneficial percent is a major development for our when they happen during a site visit and we economy. But how, in everyday terms, is it have an opportunity to observe operations being accomplished? first hand. Recently, I have seen a couple of These periodic trips provide us with a impressive examples: wealth of information, offering a degree of • During a June visit to Cody, Wyo., insight that is not possible through other officials with Cody Laboratories, a bulk means. Standing on the factory floor, it pharmaceuticals lab, explained how one of is much easier to understand how a their chemists has developed a new way of specific, and sometimes minor, change producing active ingredients in painkillers along the production line can greatly by recovering certain byproducts. The improve efficiency. development has made a huge impact on It is the gains in productivity we their operations, increasing productivity by occasionally find that may be the most 50 percent. striking and, in many ways, the most • In July, I had the opportunity to visit relevant when looking more broadly at Union Pacific’s massive rail facilities in FALL 2007 • TEN 1 Y providing us with more leisure time has not occurred, developments such as cell E RALE phones and widespread Internet access have N made us more productive. Those who travel DIA by regularly, for example, know that only a few OS T years ago the first day back in the office O after a lengthy business trip would likely be PH lost to catching up on missed reports and BOARD MEMBERS of the Federal Reserve Bank of meetings. Today, thanks to technology that Kansas City toured the Union Pacific Bailey Yard in allows us to monitor North Platte, Neb., where roughly 150 trains pass e-mail virtually every 24 hours. Staff talked with Board members anywhere in the about capacity challenges the industry faces. world, we are able to return to the office in “real time.” North Platte, Neb. Facing increasing It is important to pressure to improve efficiency amid high note, however, that energy costs, UP has begun to apply while technology is NASCAR-style principles, creating what a vital contributor is essentially a pit crew environment for in productivity some of the train maintenance procedures. growth, the gains This element from one of the nation’s most are not solely the rapidly growing spectator sports has had a result of laptop profound impact on the rail line founded in computers or the the 1800s. In some cases, repairs that once ability to connect to meant a railcar would be out of service for a Wi-Fi system while 12 days can now be completed in a matter waiting for a delayed Board members visited the Wild of 15 minutes. Because of the nature of flight to arrive. Horse Creek Ranch in Nebraska, UP’s business, these types of gains can have The very human owned by the family of Omaha far-reaching implications. A more efficient factor of innovation Branch Board Member Jim delivery of goods and materials can help to is at the core of Timmerman, left. He and ranch improve the efficiency and productivity of these gains and, in manager, Jack Harwager, right, those awaiting the shipments. the Tenth Federal discussed with Board members the In addition to these two instances, I unique challenges of ranching. Reserve District, it is have seen similar innovation occurring something that goes to varying degrees during recent trips to on every day. Los Alamos, N.M.; Weatherford, Okla.; Montrose, Colo.; and Salina, Kan. Much has been said about productivity growth in recent years, especially as it relates to technology. Although the somewhat THOMAS M. HOENIG, PRESIDENT utopian 1950s vision of a high-tech future FEDERAL RESERVE BANK OF KANSAS CITY 2 FALL 2007 • TEN LOOK ONLINE FOR THESE PUBLICATIONS FROM THE FEDERAL RESERVE BANK OF KANSAS CITY ECONOMIC REVIEW www.KansasCityFed.org/EconomicReview Articles on macroeconomics, monetary policy, banking, financial markets and payments systems. THE MAIN STREET ECONOMIST www.KansasCityFed.org/MSE A newsletter on economic challenges and opportunities around the region. FINANCIAL INDUSTRY PERSPECTIVES www.KansasCityFed.org/Perspectives Articles on banking issues and topics regionally and nationwide. PAYMENTS SYSTEM RESEARCH BRIEFING www.KansasCityFed.org/PSR-Briefing Articles on developments in payments networks, participants’ roles in the payments system and more. PHOTO by TOby JORRIN 4 4 FALL 2007 •TEN 2007 FALL Rebecca Bluestone moved to Santa Fe for love. Not long after graduating from Oklahoma State University, Bluestone left the family ranch for the East Coast, armed with her degree in humanities. She had always loved art, but couldn’t draw very well and was told she wasn’t artistic. fter working some odd jobs, Bluestone visited New Mexico’s capital city to attend a two-week tapestry weaving workshop taught by a renowned Hopi Indian A artist. She fell in love with “the spiritual geography of the Southwest,” and her future husband, Robert, a guitarist. Both have kept her in Santa Fe for the past 21 years. The area “really feeds my work,” she says. Bluestone’s tapestries, which are displayed in museums, universities and public buildings, feature subtle color graduations and geometric designs. Her style is simple but vivid; precise yet mysterious. Inspired by what lay outside her studio doors––green mountainsides, blue sky and red desert—Bluestone knows their livelihoods would not be the same if she and Robert lived absent of the amenities the city of about 64,200 offers them. FALL 2007 • TEN 5 N ORRI BY J BY O T by O T O PH REBECCA BLUESTONE IS A CONTEMPORARY ABSTRACT ARTIST whose technique is influenced by the Southwest and Native American cultures, among others. Santa Fe “really feeds my work,” Bluestone says. “I couldn’t imagine leaving here,” Rappaport says. “We’re richer as a society she says. and we can care about things like living some Like Bluestone, U.S. residents more and place that we think of as nice.” more are moving to places offering a high quality of life. And they’re willing to pay more Trading consumption to live there, says Jordan Rappaport, a senior Centuries ago, people’s primary concern economist with the Federal Reserve Bank was daily survival, but today, we have more of Kansas City, who recently examined luxuries than those before us. the importance of natural and man-made Rappaport’s research shows that a metro amenities in population growth. area with high amenities––such as good weather, “Simply put, people are willing to go where recreation or nightlife––can grow as much as their jobs may not be as good in order to be in several percentage points faster per year than a more desirable place that often costs more,” an area without the same qualities. Often these 6 FALL 2007 • TEN areas already have a high population density. regrets even though they had to leave behind For example, between 1950 and 2000, a new boat and the convertible sports car is no Miami, Orlando and Phoenix each grew by an longer drivable year-round. annual average of more than 4 percent. Tampa, It’s the blend of metropolitan and recreation San Diego and Austin each grew more than 3 that draws people to the Mile High City, says percent.