A higher loyalty

After over a decade of first-rate stewardship, Jon Faust is resigning from his post as CFE Director to become senior special advisor to the newly appointed Federal Reserve Board Chair, Jerome Powell.

Ordinarily one protests the exit of an esteemed colleague. However, in his new role, Jon will be immersed in debates of the utmost importance for the stewardship of the U.S. and global economy. Thus, sadly but genuinely, we wish him all the best in his new post.

Jon Faust was the first, and to date the only, Director for the Johns Hopkins Center for Financial Economics. He assumed that role in late 2007, and oversaw the creation and expansion of CFE. Faust brought to the task a rare combination of skills and interests. First and foremost, Jon completely embraced CFE’s two foundational notions. Big picture thinking about the overall economy demanded serious focus on financial market issues. Conversely, financial market theory was incomplete, when served up outside of a macroeconomic framework. Jon believed these twin notions in 2007, when he signed on as CFE Director. To state the obvious, in the aftermath of the Great Financial Crisis, circa 2008-2009, many other luminaries in the field were forced to play a great deal of catch up.

Faust’s clear theoretical thinking on the finance/real economy nexus was matched by his real world intuition on such matters. In early 2008, at a CFE sponsored evening seminar, the issue at hand was the simmering crisis in the sub-prime U.S. residential real estate market. Several speakers embraced the conventional wisdom, the collection of problem loans, relative to the overall market was small. Thus, the problem would be contained. “Maybe,” Jon replied. “Just as likely however, we will find ourselves in much deeper trouble, and we will judge that, knowing all the pain that has unfolded, it would have been cheaper to just give all the sub-prime houses to their occupants for free.”

In the spring of 2009, with the jobless rate rocketing toward 10 percent, and with the stock market down around 66 percent, a number of us who attended the conference gruesomely chuckled, as we agreed that handing over those houses might have been a genius stroke. Over the period since the end of the Great Recession, Jon was in the thick of academic and policy discussions linked to central banks and macroeconomic dynamics. In summer 2013, at the annual Jackson Hole monetary policy conference, Faust delivered a very influential paper on the limitations of the models of normal cyclical dynamics that are conventionally used in macroeconomic modeling.

In more down to earth prose, Jon offered blogposts on the CFE website. Economic, financial market and monetary policy matters were discussed in a fashion that brought depth, relative to traditional media commentary, but that stopped short of full-bore academic treatment.

Within the confines of JHU, Jon’s courses, his oversight of the weekly reality roundtable seminar, and his guidance to undergrads embracing the CFE minor were exemplary. He was showered with high praise from students both as they travelled through JHU and, as importantly, from a distance, when they thought about who had made a difference to them in their schoolwork at JHU.

I’ve had the pleasure of being Co-Director of CFE with Jon over the last few years and will assume the role of Director. CFE will continue its twin pursuits, as the Center strives to offer first rate financial economics training and expands academic thinking about the finance/economics interplay. The Economics Department will, in due course, be looking to fill the Louis J. Maccini Chair vacated with Jon’s move to the Fed.

To be sure, Faust’s capabilities as thinker, practitioner, commentator, educator and colleague were nothing short of first rate. We will miss him terribly at JHU. For his sake, our sake, and the world economy’s sake, we wish him great success in his new endeavor.