Adviser on Banking Gives Bush a Trader’s-Eye View

WASHINGTON — K. Philippa “Pippa” Malmgren used to travel the globe for banking companies, analyzing politics and policies to advise fund managers on when to buy or sell. Now the PhD economist analyzes the world’s markets to advise President George W. Bush.

“My particular area of expertise was understanding how political and policy choices would ultimately impact the direction of national economies,” said Ms. Malmgren, a special assistant to the President for economics policy. She serves on the National Economic Council headed by chief White House economics adviser Lawrence B. Lindsey.

Her new job — which entitles her to be addressed as “The Honorable” — entails “looking at many aspects of financial markets, not only policy issues but the actual developments,” she said in a recent interview from her post in the Eisenhower Executive Office Building, the grandiose, 130-year-old structure next to the White House where most of the President’s staff work.

“I come in in the morning,” she said, “and have a look at what the prices did overnight, what announcements are going to be made today … with a view as to how they might impact the U.S. domestic economy and our policy choices.”

Banking policy is part of her broad domestic financial markets portfolio. Others on the council track agriculture, energy, labor, Social Security, and technology issues.

“I was asked to look at financial markets, partly because Larry Lindsey wanted to ensure we had some practical experience. Apparently I bring that to the table,” said Ms. Malmgren, who just turned 39. “There’s no doubt that having spent one’s career mainly on trading floors gives you a certain perspective on things.”

She started out in the industry selling hedge funds for Bankers Trust in London two years after earning her doctorate from the prestigious London School of Economics in 1991. She went on to run the bank’s Scandinavian alternative asset marketing operation and then moved to Hong Kong to manage its Asian asset management business. It was there that she met her husband, an Australian asset manager.

In a career move that helped lay the groundwork for her current post, she “decided to … match what I knew about finance with my understanding of how politics and policy act, and married the two by becoming a strategist.” Ms. Malmgren had grown up in Washington surrounded by political and economics theory as the daughter of the economist Harald Malmgren, a former deputy U.S. trade representative and trade negotiator in the Kennedy, Johnson, Nixon, and Ford administrations.

“I found that big institutional fund managers have a huge amount of information about economics but the one layer where they traditionally are not as strong is understanding what policymakers are doing,” she said.

So she returned to London and became Bankers Trust’s chief currency strategist in 1998. Though she had the option of staying when Deutsche Bank AG bought Bankers Trust in mid-1999, Ms. Malmgren was lured away by an “outstanding offer” from UBS Warburg (now UBS PaineWebber Inc.) to be its top political and policy analyst and deputy head of global investment strategy.

In both jobs, “it meant I was just about living out of airplanes,” she said. “I was on the road about 170 days a year, visiting clients all over the world and working with them on their asset allocation, trying to figure out what was the right thing to buy and the right time to buy it; and the right thing to sell and the right time to sell it.”

It was at this time that she got to know Mr. Lindsey, a former Federal Reserve Board governor who was running Economic Strategies, an economics advisory consulting firm based in New York.

“He was a friendly competitor of mine, and I was for him,” Ms. Malmgren said.

Buoyed by a growing demand for her politics-based economics advice, she left UBS Warburg last year to start her own London-based consulting firm, Malmgren & Co. One client, in a sense, was then-Texas Gov. Bush, to whom she was introduced by Mr. Lindsey, the Bush campaign’s chief economics adviser.

Ms. Malmgren became what she calls a “volunteer adviser” to Mr. Bush and was “called upon to provide my insight from time to time” via e-mail and telephone.

She did not hit the campaign trail, though. “I was all over the world but not in Iowa,” site of the first presidential nominating contest, she said.

In January, President Bush offered her the White House job. “It was such an amazing opportunity,” she said, that she and her husband had no difficulty deciding to trade London for her hometown. They are buying a home in the affluent suburb of McLean, Va., and she is introducing him to such Americana as crab feasts and scrapple.

“I’m probably the only person in the White House who had to move back to America to take the job,” the 16-year expatriate joked. “I’m very glad I had the chance to really get a sense of how to work in Europe and Asia. I hadn’t intended to spend so long living outside the U.S., nor had I intended to come back at this time. It’s just that things happen the way they happen.”

Her job, which she started in February, is to analyze “the issues, the players, and how the different departments of this government are leaning,” to determine whether the White House needs to take a position on an issue, and, if so, to present policy options.

Ms. Malmgren reports to Mr. Lindsey and advises the President “when there is a need for it,” she said. On what and how frequently, she would not say.

Others have used this job as a stepping-stone, including Ellen Seidman, who held the same post in the Clinton administration for more than four years before becoming director of the Office of Thrift Supervision in 1997.

One of the few banking industry hands in Washington who knew Ms. Malmgren from her globe-trotting days is former Bankers Trust vice chairman Eugene A. Ludwig, whose tenure at the banking company overlapped hers.

“Pippa’s Wall Street experience — her practical understanding of how banking and finance is done today, the potential perils and opportunities for the industry — will make her invaluable in the White House,” said Mr. Ludwig, President Clinton’s first comptroller of the currency who now runs the Washington venture capital firm Promontory Financial Group.

In between White House meetings and tracking the markets and the Congress, Ms. Malmgren makes the rounds of Washington conferences and cocktail parties, disarming those she meets with her warm style and firm grasp of often arcane banking policy.

“She understands the issues; asks good, insightful questions; and gives us a chance to make our case,” said Diane M. Casey, president of America’s Community Bankers, who said she has found Ms. Malmgren to be “very accessible and easy to deal with” since first encountering her a few months ago during a White House meeting with Mr. Lindsey.

“She answers her own phone; she talks to you,” Ms. Casey said.

That, in fact, is one of the “two basic rules I have for myself,” Ms. Malmgren said. “One, don’t assume anything. The second, talk to everybody.”

“It’s very important to be sensitive to the insights of those who are … working in the trenches of financial markets,” she said, “because they understand better than anybody else what is going on … and those who are affected by what financial markets are doing.”

In keeping with the Bush White House’s tight-lipped style, Ms. Malmgren declined to say what issues she is working on, though she said she is not involved in the presidential appointment process. She would only say, “Anything that the legislature has raised is something we’re looking at as well.”

“The problem is, once you start citing all the issues, everybody thinks” White House action “is imminent, which it isn’t necessarily,” she said.

She also is helping lay the foundation for a financial services policy.

“The secretary of the Treasury and the President over time will be reviewing and defining the priorities on financial market issues,” she said. “Right now, what I’m focused on is preparation.”