Philadelphia Salaries 2010: Mark Zandi Profile: The Hardest-Working Man In the Recession

Economic catastrophe may have been tough on your wallet, but for widely quoted West Chester economist Mark Zandi, it’s been a great career boost

Alongside the green room at the Fox Business studio in Washington, D.C., minutes after Mark Zandi has walked into the building, a makeup artist is patting a tan sponge against his face for a live TV segment. She won’t reveal what kind of paint she’s putting on his cheeks. “Trade secret,” she says. Then, to Zandi, sort of winking: “Trust me, you don’t need much.”

Zandi doesn’t need much help getting settled in front of the camera, either. An anchor in New York will interview him remotely this -morning — yet another appointment on a typically jam-packed day for Zandi — so after a sound technician clips a microphone onto his lapel, Zandi sits alone in a chair, as still as the Lincoln Memorial, waiting for his close-up. He’s about to do a live national TV interview about the state of the economy with as much fuss as going into Starbucks for coffee.

Well, he has done this a lot lately. Zandi’s parlor trick for TV is that he can peer into the economic future and explain it more clearly than a lot of people. This superpower has made Zandi, 50, a wealthy businessman, selling forecasts to companies and governments as chief economist at Moody’s, the consulting firm he co-founded in West Chester. His ability to hear the distant thunder and interpret it calmly for the huddled masses also has made him the man of the moment, one of the hottest economists in the country, if it’s not too weird to put “hot” and “economist” together.

Zandi’s name is everywhere — pick up any newsmagazine or newspaper story about the economy and scan for the capital Z. The year-end issue of Newsweek had a page quoting 10 people in an effort to explain 2009. The first quote was from George Bush, the second from Zandi, the third from Barack Obama. (The 10th was Tiger Woods.) On CNBC’s Squawk Box in mid-December, host Joe Kernen introduced Zandi like this: “Moody’s chief economist Mark Zandi, who if you Google him — he’s like, every day, Zandi, Zandi. Zandi this, Zandi that.”

The red light comes on at the Fox studio.

Anchor Dagen McDowell introduces Zandi and says: “More and more it seems like you’re going out on a limb, that the Federal Reserve should for now keep the easy money flowing, that stimulus money should keep moving to states, to the unemployed and the like. Why do you think that?”

Sensitive types might detect some conservative code language in there (easy money … to the unemployed), but Zandi plays it straight: “Well, first of all, I think that the recovery will remain intact, and that we will not backtrack into recession, but the odds of something going wrong are still uncomfortably high. … ”

Other economists have used the flattened economy to push their own political agendas, but Zandi refuses to become a political position player for the media. “I won’t engage,” he says when the Fox interview is over. “They pretty much know that, I think.” Which helps explain, at least in part, why Mark Zandi has become the Great Sage of the Great Recession.

In times of uncertainty, when the storms of craziness swirl, the public turns anxiously to reassuring voices who deliver the kind of hope that can only come when we believe we’re not completely clueless. Who can forget that expert from the National Hurricane Center who becomes a comforting guide on cable TV news every time a tropical cyclone threatens our loved ones? What’s that guy’s name again? Frank something?

Now an economic catastrophe is pounding in, and new voices have risen to help us cope — none more ubiquitous than Zandi’s. It helps that he’s been right a lot about our current troubles. In 2005, while speculators were gobbling up houses, Zandi told the Los Angeles Times that then-Fed chief Alan Greenspan needed to tighten lending standards, that “the Fed deserves some criticism for its handling of the stock bubble and now the housing bubble.” In October 2006, an report used the word “crash” to forecast housing in 2007 — not long before that market fell apart, too.

In happier predictions, last January Zandi started saying the recession would end on September 15, 2009. Oh, really? On that very day, Fed chief Ben Bernanke stepped up to a microphone at the Brookings Institution and announced: “… from a technical perspective, the recession is very likely over at this point …”

Also crucial to Zandi’s credibility is his insistence on being apolitical. He’s a Democrat who has contributed to and advised both sides. (He advises politicos for free.) But his true religion, he swears, is the data. He strives to lead policymakers toward salvation with virtuous forecasts based on solid computer models. During the 2008 presidential campaign, Zandi jumped at the chance to write weekly reports as a member of John McCain’s team of advisers. But as the economy sank, he ran the data and became a vocal supporter of the very non-McCain-y $787 billion stimulus package the Democrats passed last year. He calculated “bang for the buck” numbers showing that federal aid to states would add, say, $1.36 per aid dollar to the economy, whereas the Bush tax cuts added 29 cents. (Zandi thinks the stimulus helped and insists we need more cash to finish the job.)
And that’s how Mark Zandi got his tie caught in the political sausage machine. “I’m just saying what Mark Zandi from Moody’s, an adviser to John McCain, is saying,” House Speaker Nancy Pelosi told the media last February after the stimulus passed, as if holding him responsible for the liberal agenda. Zandi has been to the Obama White House four times, including for last February’s Fiscal Responsibility Summit, where Joe Biden introduced him as opening speaker to an audience that included the President. As for opinions on the other side of the aisle, a website called recently put aside its burning hostility toward Princeton lefty Paul Krugman to name Zandi America’s “Worst Economist.”

Among his peers, though, Zandi commands plenty of respect. Kevin Hassett of the conservative American Enterprise Institute, a friend of Zandi’s who persuaded him to join McCain’s crew, has his own forecast: “Mark is on a trajectory similar to that of Alan Greenspan at a similar age,” Hassett says. “We shouldn’t be surprised if ultimately he’s running the Federal Reserve, or is a top official in some White House, maybe even the Obama White House in the second round. He’s steps ahead of everyone else because he’s worked harder.”

Zandi was born in Atlanta while his father, Iraj Zandi, was getting a PhD in engineering at Georgia Tech. When Mark was a baby, Iraj moved the family to his native Iran and worked in the oil industry for a couple years. They returned to the U.S. when Iraj began teaching at the University of Delaware in 1962; later, he would teach at Penn. Mark and his four siblings grew up in Gulph Mills. He went to Upper Merion High, where he played in the band, ran track and played football. But he was hooked on economics early. “I can remember in maybe fourth or fifth grade, I did a project to determine why Detroit had become the global center for the auto industry,” he says. “I didn’t know it was economics at the time. But my interests and proclivity were in that direction from the beginning.”

Zandi went to Wharton undergrad and earned a PhD in economics at Penn. He may have been at Wharton at the same time as Comcast CEO Brain Roberts. “Probably,” Zandi says. “I don’t recall him being there. Well, I don’t recall very many people, to tell you the truth.” He became enthralled with econometrics — running economic data through mathematical equations, using past causes and effects to forecast the future. Zandi and his friend Paul Getman were working at a local firm after graduation when, in 1990, they hatched a scheme to start their own business.
“Paul was more of the risk-taker,” Zandi recalls. “I said, ‘Sure, I’ll do it, but only if we have a project.’ I was married and had a baby coming.” They got a gig with their first proposal, helping a credit card company target people who might use cash advances.

“We got all the data for seven million cardholders, put it on Penn’s mainframe,” Zandi remembers. “It seems almost quaint now. Now we process all the credit files in the country, every month.”

The company began publishing economic forecasts. Banks, insurers, hedge funds, card companies and governments (every state is a customer) pay from a few hundred dollars per report to several hundred thousand a year for subscriptions, so they can make their own projections. The firm grew steadily, by around 15 percent a year, expanding from local to national, then internationally. In 2000, the firm trendily changed its name from Regional Financial Associates to, but it never went public. It worked out nicely. In 2005, when Moody’s bought the company for $27 million, the founders (who include Zandi’s brother Karl) didn’t have to share the loot with outside investors.

“We were happy,” Zandi says, as low-key as ever. “It hasn’t changed my lifestyle in any significant way. I don’t really have hobbies. I really just work.”

He joined McCain’s brain trust a couple years before the election, after Hassett asked. He never met McCain. He wrote analyses on jobs and the economy that the Senator would read on flights from D.C. to Arizona. But it became clear Zandi’s view of the economy was too dismal for Team McCain. “By the end of the campaign, my voice was not being heard at all,” Zandi says. (It wasn’t Zandi’s intelligence that led McCain to call the fundamentals of the economy strong. “I had no input into those broader statements,” Zandi says diplomatically.)

It’s natural to wonder how a forecaster who foresaw the financial meltdown did with his own money.

“Probably a little bit better than the benchmarks,” he says. “I paid attention to being appropriately diversified. I don’t have the time, really, for stock-picking — I’m more worried about whether I have the right proportion of U.S. equity, global equity, fixed income, municipal bonds, cash, real estate.”

Very sensible, naturally. It’s not as if Zandi threw a chunk of his wealth into Florida real estate. Wait — what?

“I did buy a home. On an island, in Vero Beach,” he says. “My horizon is very long. We’re going to retire in Florida.”

After the Fox interview, Zandi walks 10 minutes to D.C.’s Union Station to take an Acela to Philadelphia. For pretty much the whole train ride, he’s explaining the -economy — in a phone interview with American Banker, a chat with the CFO of a client. Everyone’s asking the same stuff: What’s next? When? And the reason he was in D.C. in the first place was to address something called the Democratic Budget Group. Members of Congress formed the group years ago to conduct closed-door sessions, no media allowed, where they can freely ask dumb questions.
“I had a PowerPoint prepared, but after two slides they just started asking,” Zandi says. Lawmakers quizzed him on what will happen with credit, with jobs, and how to tell if the policies they’ve implemented (some on Zandi’s advice) are working. A lot of the lawmakers were making jokes about how grim things seem to be.

“There was dark humor,” he says. Like what? “I don’t really remember,” Zandi admits. He later explains: “I don’t remember jokes, because I don’t really tell them. I don’t think that way. I think more like an academic.”

When he arrives at 30th Street Station from D.C., Zandi takes a taxi to Philadelphia International Airport, where he left his car the day before to fly to Chicago to meet with a credit card company. Then he drives himself to’s office in downtown West Chester.

At his desk, the phone keeps ringing. The Washington Post calls. The L.A. Times. Reporters love Zandi because he makes their job easy. He’s generous with data for stories and charts. He’s patient with dumb questions, great on camera. “In television, you have viewers’ attention for a -minute-30,” says CBS News producer Peter Burgess. “He can break down something that economists deal with, in words everybody can understand, in 15 seconds.”

Between calls, Zandi eats a banana. On his desk, an electric shaver recharges next to a calculator. Down the hall is a conference room set up as a mini studio, with broadcast-quality video and audio gear, so he can do TV and radio interviews from West Chester. “On a busy day, he’s in here maybe four times,” says Sara Rodriguez, Zandi’s assistant and the company’s speaking engagements manager.

On Zandi’s bookshelf are copies of his 2008 book, Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis. It’s a lucid explanation, though he left something out. A lot of people have blamed the meltdown partly on debt-rating agencies, who, like lazy high-school teachers, gave out easy A’s to worthless, sub-prime-backed investments. One of those agencies was Moody’s, which now owns Zandi’s firm. “It’s the missing chapter,” he admits. “I didn’t think people would believe what I said about it.”

One thing he knows about his book: He won’t be starting the next Freakonomics franchise.

“Things like Freakonomics are based on behavior, which is very important and interesting, but it’s just not me,” Zandi admits. “My approach isn’t going to be adopted in pop culture in any way. It’s just too boring. The only reason it’s been brought into the culture at all is because of the environment we’re in. This is a brief time. It’s not going to be this way forever.”
At 3:30, it’s time for the firm’s regular “Macro” meeting. Zandi has been explaining the economy to people all day, and here comes more. About 35 company economists who prepare reports meet so they can all agree what to tell people. Far from the Beltway, surrounded by fellow wonks who appreciate that it’s all about the data, Zandi loosens up. He cajoles junior people to sit up at the table instead of in chairs lined against the wall. When someone suggests that uncertainty about national health-care policy may be delaying hiring, Zandi asks for evidence: “Do you have data showing that? Is your wife complaining?”

They run through projections for unemployment (rising through summer 2010 to peak at 10.6), housing prices (declining 10 percent, to bottom in Q3), mortgage rates (edging up half a percent). Is he right? Maybe. One thing’s customers know: Zandi is giving the same numbers to lawmakers, and that can influence what happens.

Toward the end of the meeting, someone asks Zandi about mortgage lenders Fannie Mae and Freddie Mac, which the government took over. He unwinds a 10-year scenario. Another colleague asks what the impact on the federal budget will be.

“Wow, you’re really testing my forecasting prowess here,” Zandi says. “I think we’ll make money on Fannie and Freddie.” And then: “It’ll be a 5.68 annualized return.” The roomful of economists cracks up. As if anybody could really put numbers on the future like that.



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