WASHINGTON – Before she helped Ben Bernanke transform the Federal Reserve, before she was a top aide to Alan Greenspan, before she was a confidante to Timothy Geithner and a senior adviser to Lawrence Summers, Michelle Smith made a mistake that could have ended her career.
She told a group of reporters not to get lunch.
It was 1993, and the Clinton administration had decided to intervene in currency markets to bolster the value of the dollar vs. the Japanese yen. The element of surprise was critical. If investors knew what the United States was going to do, the purpose of the intervention could be defeated.
Smith was a few years out of Baylor University, a wide-eyed Dallas native who had come to work in the mailroom of Sen. Lloyd Bentsen, D-Texas, before President Bill Clinton named him Treasury secretary. At Treasury, she was a junior aide who handled public relations for the international affairs division and worked for a young, brilliant and brash Harvard University professor named Larry Summers. I was not pleased to get a person so inexperienced, he recalled.
One day, Summers told Smith that she should prepare to distribute around noon a news release announcing the currency intervention to reporters in the pressroom at Treasury. This was a problem. There was an unwritten rule that between noon and 1:30 p.m., reporters could go to lunch and Treasury would not make major announcements.
So a little before noon, Smith sneaked down to the basement. Maybe nothing will happen, she told reporters, but you might want to stick around. Simple enough. She returned to her office – and a phone message from Summers asking her to return to his.
The walk from the second to the third floor of Treasury felt like the longest of her life. Summers and 20 other senior officials were waiting. What did you do? Summers asked.
Smith was flummoxed. I just told them not to go to lunch, she said. Summers pointed to his financial terminal: The markets were going crazy. That little hint from Smith led to news reports that the government was about to intervene. I was bouncing off walls, Summers recalled.
Smith apologized – and offered an idea: Does anybody have anything that needs to be announced?
In fact, Treasury needed to comment on the naming of a new president of the European Bank of Construction and Development. Smith asked for all available information about the official.
Later that afternoon, Treasury announced the currency intervention, and it had its intended effect.
I went from being furious to enormously admiring her cool under pressure and good judgment, said Summers, who became Treasury secretary. And for the next seven and a half years, we worked together virtually every day.
In the two decades since, Smith has been a key player shaping how the public perceives the actions of Washington’s most important economic policymakers.
Smith, 44, who is the Fed’s chief of staff and runs its office of public affairs, was instrumental in pushing the naturally reserved Fed chairman, Bernanke, and the famously secretive central bank to become more open and to engage the media as never before. The goal was to convince the country – largely through the reassuring words of the soft-spoken Bernanke, a son of Dillon, S.C. – that the Fed was out to help the average American worker.
Most accounts of the economic ups and downs of the past 20 years have focused on the leading men. Smith’s story is about what it’s like for a woman to operate out of the public eye but in the upper echelons of American government while striving to balance work and family life. It’s a story that reached another turning point Saturday, as Bernanke was scheduled to step down and Janet Yellen, the Fed’s vice chairman, ascends to the central bank’s top job.
Smith is one of the most powerful women no one has ever heard of, said Jake Siewert, head of communications for Goldman Sachs and former official in the Clinton and Obama administrations.
Smith traveled the world with Summers and his chief of staff, Sheryl Sandberg, who would go on to become the No. 2 at Facebook, author of the book Lean In and one of the most influential female executives of the country. But in those days, Sandberg looked to Smith for inspiration about raising a family in the intense world of high finance and politics.
Michelle was my first friend and peer who I was working with who had a child, Sandberg said, recalling the birth of Smith and husband Blake’s daughter in 1997. Michelle took maternity leave and came back. She laid down that example for me and others.
At the end of the Clinton administration, Smith joined Greenspan, the Fed chairman, who was viewed as a maestro overseeing a remarkable period of economic prosperity. Together, Greenspan and Smith refined a style of media outreach that has survived, even while much else has changed about the Fed. For most of its history, the Fed said almost nothing about what it was doing. Reporters and investors were left to divine policy from market patterns.
Then, in 1994, the Fed began announcing policy actions at the end of meetings. When Greenspan prepared to step down in 2006, he asked Smith to go with him to start a consulting firm. She reluctantly agreed and told the new chairman, Bernanke, that she would go. The Fed announced her resignation on a Friday.
Over that weekend in 2006, Smith was in tears, regretting the decision. She finally told Greenspan. I hoped very much she’d become a partner of mine in the business, and despite the potential large rewards, she decided the Fed needed her more than I did, Greenspan said.