James Pierce

| 04 March 2009

James PierceJames Pierce

James L. Pierce, a professor emeritus of economics and an authority on banking and monetary policy, died of lung disease in Alta Bates Hospital on Feb. 15. He was 71.

Pierce published extensively on macroeconomics, monetary economics, and banking, with an emphasis on public-policy issues. He frequently testified before Congress, advised government agencies in the United States as well as abroad, and served with the Federal Reserve Board during the savings-and-loan-industry debacle in the mid-1970s.

“His major contribution was in applied monetary policy, both writing about it and shaping it,” said Roger Craine, a Berkeley professor of economics who worked for Pierce at the Federal Reserve before they reconnected later on campus. “He cared about economic policy and was always involved in it.”

At the time of a banking upheaval in the 1980s, Pierce argued that banks needed to have more capital to handle increasing risk. “The capital I think they had in the past was appropriate for a world that was much more stable than the one we have now,” Pierce said in a San Francisco Business Journal interview in 1984, describing a financial world much like the current one.

Born in Berkeley on Sept. 24, 1937, Pierce grew up in the San Joaquin Valley farming town of Dos Palos, where his father was partner in a car dealership. He attended UC Berkeley, earning a B.A. and Ph.D. in economics here in 1959 and 1964, respectively.

Pierce joined the economics faculty at Yale University in 1963 and was a member there of the Cowles Foundation for Research in Economics. He left Yale in 1966 to accept a position with the board of governors of the Federal Reserve System, where he remained until 1975, serving as associate director in the division of research and statistics and as an associate economist with the Federal Open Market Committee.

After leaving the central-banking system in 1975, he spent a year directing the Financial Institutions and Nation’s Economy study for the U.S. House of Representatives Banking Committee. The report was mildly controversial, Craine recalled, “because Pierce never pulled any punches.”

Pierce contended that the 1980s savings-and-loan crisis was a minor problem that escalated into a major fiasco due to policy errors that he and others noted and tried unsuccessfully to change — such as deregulation of the asset side of the savings-and-loan banks, which cleared the way for loans of any kind while retaining liability limits that minimized the impact of the S&Ls’ bad business practices.

In 1976, Pierce returned to Berkeley as a professor of economics. He taught graduate and undergraduate courses in macroeconomics, monetary and financial economics, and economic policy, and also taught the principles of economics to beginning undergraduates.

His publications included the book The Future of Banking (1991) and “Origins and Causes of the S&L Debacle: A Blueprint for Reform” (1993), written for the National Commission of Financial Institution Reform, Recovery and Enforcement, where he served as executive director. He also contributed a chapter about integrating banking with other financial services to a 1988 book, Regulating the New Financial Services Industry.

In another book, Bank Management and Portfolio Behavior (1973), he and co-author Donald Hester of Yale presented the first econometric analysis of commercial-bank and mutual-savings-bank behavior based on individual bank data.

Pierce is survived by Suzanne Pierce of Berkeley, his wife of 18 years, who is assistant dean for administration and finance in Berkeley's College of Chemistry; by his children Jonathan Pierce of Lafayette, Susan Pierce of Rancho Palos Verdes, and Sam Pierce of Berkeley; by his sister, Carol DelaCruz of Benicia; and by two nephews and three grandchildren.

There will be no memorial service for Pierce. Friends may donate in his name to the organization of their choice.