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  Still, it was impossible to live in Southeast Asia in the wake of the Vietnam War without becoming conscious of the world’s ambivalence toward America. In many ways, being abroad made me more aware of the exceptional things about America, but it took the edge off the more triumphal forms of American exceptionalism. I read The Ugly American and The Quiet American, books about our arrogance and ignorance of the world around us. I had an early exposure to the capacity of America to affect the world, in many ways for the better, in some ways not.

  My parents didn’t preach to us about these things. They believed in show, not tell. They exposed us to an incredible diversity of cultures and religions and customs, always without judgment. We learned to draw our own conclusions, to be curious about the world yet humble about our ability to understand it.

  MY FIRST real adult decision was where to go to college. I had no idea what I really wanted, but I got into Dartmouth and Carleton; I got wait-listed at Williams and Wesleyan. My father and several other relatives had gone to Dartmouth, and I initially resisted the idea of going there—partly because I wanted to carve out my own path, partly because I felt guilty about the advantages I had applying as a legacy. I decided those were weak reasons not to go to a good school.

  Dartmouth and the small college town of Hanover, New Hampshire, offered extreme culture shock when I arrived from Bangkok in 1979. It was cold, and I showed up without a winter coat. Academically, Dartmouth was much harder than my high school. And socially, I felt similar to the way I had felt after moving from India to Westchester for junior high: unfamiliar with and uncomfortable in the dominant culture. Most of my classmates seemed like they had been born at Exeter or Andover, and already knew exactly where their lives were headed. I had no idea.

  I did have a moment of serendipity on my way to register for classes, when I overheard a professor swearing in Thai. It turned out that he had attended the same schools I had in India and Thailand. He suggested I sign up for Chinese, which I did and came to love, with the guidance of a great professor, Susan Blader. Otherwise, I was an unexceptional and mostly uninspired student. I had a few government classes I liked, but I took just one economics class and found it especially dreary. I had good friends, but I was not part of the fraternity mainstream on campus. I worked part-time throughout college to help cover the cost—washing dishes in the dining hall, taking photos for the college news service, working as a drill instructor for other students taking Chinese. I also did internships at Mobil Oil’s corporate communications office and the Sawyer Miller political consulting firm. They were good experiences, I guess, but mostly in demonstrating that those lines of work were not for me.

  I was a registered Republican then, but without much conviction. I had no passion for politics. I took pictures of the 1980 primary campaign for the college newspaper, but I don’t remember if I even voted that year. I did develop a strong aversion to the strident conservative Republican political movement that was spreading across college campuses at the time. After the Dartmouth Review, the intellectual center of the movement, published a McCarthy-style list of gay students on campus, I ran into a Review writer named Dinesh D’Souza at a coffee shop and asked him how it felt to be such a dick. D’Souza would later become a celebrated right-wing intellectual and author of conspiracy-minded best sellers about President Obama, so I guess I didn’t sway him. Several other Review founders would join the Wall Street Journal editorial page; they would not be big fans of my later work.

  Some of my most important experiences during college happened off campus. The first was over Christmas break of my freshman year, when I got to photograph refugees in two massive camps along the Thai-Cambodian border for the Associated Press. These camps extended as far as the eye could see, with a horrifying level of deprivation and filth. They were filled with Khmer Rouge in black pajamas, fleeing the Vietnamese invasion of Cambodia. These victimizers turned victims cast a morally confusing shadow on the tragedy, but even after my experiences in India, the suffering left me numb. I took a lot of pictures, but there wasn’t much satisfaction in depicting misery well. I loved the craft of photography, but I started to realize I did not want to spend my life as an observer. I wanted to do things, not just see things, even though I didn’t know what it was I wanted to do.

  I spent that summer as a low-level chef at a restaurant in Chatham on the Cape. I loved the manic energy the job required, the thrill of having to do six things at once, the unbridled profanity of the kitchen. But my next two summers were even more memorable, because I got to study in Beijing very early in China’s opening to the West. Most of the foreign students there were from the Soviet Union or its satellites in Africa and North Korea; Americans lived in a special dorm, isolated from the others. On the walls of the showers, beneath a thin coat of white paint, we could make out Cultural Revolution slogans about evil American imperialists. The government read our mail. We were objects of fascination, surrounded by curious Chinese everywhere we went. We biked all over the city. I played Frisbee in Tiananmen Square. I remember one man at a market telling me he liked Americans, because we were optimistic and open like the Chinese—so different, he said, from the Japanese.

  I was starting to wonder whether I wanted to live as a permanent expatriate, outside my own country yet never quite part of my host country, or whether I should become more of an American, with a community I could be part of. I took an unintentional leap toward door number two in the fall of my senior year, when I signed up to live in a run-down off-campus group house. I would join three housemates, all of them women. One of them was Carole Sonnenfeld.

  Plenty of men live with their wives before marrying them. How many men live with their wives before dating them? We fell in love quickly. Carole is an unbelievably appealing woman: strong, smart, beautiful, off-the-charts empathetic. She was a policy studies major, with a minor in economics—back then, she knew way more about the stuff I’d devote my career to than I did—but she was destined to be a social worker. She had already worked at a group home for emotionally disturbed teenagers and a legal office representing abused children. Anyway, we hit it off, and living together obviously accelerated things. As Carole’s grandmother archly described our situation, it was convenient. We spent that wonderful first year living and studying together, cooking for our housemates, following recipes from her Moosewood Cookbook that still sits—heavily taped but intact—in our kitchen today.

  CAROLE AND I graduated in the spring of 1983. Dartmouth’s commencement speaker that year was the chairman of the Federal Reserve, Paul Volcker, the gruff giant who was braving intense public outrage in his quest to tame inflation by raising interest rates. Volcker would later become an adviser when I headed the Federal Reserve Bank of New York—and even later an Obama administration colleague who didn’t always approve of my work—but at the time I don’t think I even knew what the Fed was. I’d like to say that his speech inspired me to pursue a career as a truth-telling central banker and public servant, but, honestly, the sound system was so garbled I couldn’t hear a word.

  I had been considering the Foreign Service. Carole had intended to join the Peace Corps. But we abandoned those plans so we could stay together after we graduated in 1983. I still didn’t know what I wanted to do when I grew up, except be with her. Our classmates were flocking to corporate and financial jobs, but I wasn’t interested in those paths. Maybe it was just because I was fortunate enough to grow up without economic anxiety, but money wasn’t on my radar screen, and it didn’t occur to me that it might make sense to make some. I did endure one job interview with a management consultant, whose first question was about how I would turn around a small failing beer company. I had no idea.

  Eventually, I decided to go straight to graduate school, if only to get it out of the way. I applied to a bunch of master’s programs in public policy, and eventually chose the School of Advanced International Studies at Johns Hopkins, which, again, happened to be the school my father attended after the Navy. I never p
lanned to follow in my father’s footsteps, and he never put any pressure on any of us to take any particular path. But Sarah and David also went to Dartmouth, and Jonathan also went to SAIS. Sarah also followed our father into a career in global development, and is now a World Bank consultant, while Jon is a military analyst at a Washington think tank. David spent twenty years as an executive at Time, Inc., the only one of us to work in business. For me, at least, the richness and excitement of my father’s career of service—and Uncle Jonathan’s, too—dimmed the appeal of a lot of alternative paths. My parents would later head off on a new adventure in Beijing, where my father opened up the Ford Foundation’s first office in China. He funded postgraduate education programs in the United States for a generation of Chinese officials, many of whom I would later meet during my own time in government.

  I spent that summer after college shucking oysters and tending bar on the Cape. Then Carole and I moved to Washington to start our new life together. She supported us financially while I was in graduate school, first working at an economic consulting firm in Washington, then researching tax policy for Common Cause. But what she loved—what steered her into a career as a clinical social worker and therapist—was volunteering at night at a crisis hotline. Carole has always been an amazing listener, so in tune with the pain and sadness and frustration of others. She would later take a job teaching medical students how to better listen to their patients. I tend to try to analyze or problem-solve when I ought to just offer a sympathetic ear; later in my public life, Carole would often remind me about the importance of displaying more empathy.

  At the time, I was finally getting motivated about school. SAIS had a practical, technocratic, problem-solving ethic that I found attractive. I became increasingly interested in Japan, which was getting a lot of attention back then as a potential threat to U.S. economic supremacy, and I started to study the Japanese language, while continuing Chinese. I got into Japanese films and literature, too. I loved learning something entirely new, as I had done in new countries while I was growing up.

  I also slowly warmed up to economics. It wasn’t particularly advanced or math-intensive economics, but I liked the focus on how to make choices, how the world works, what determines how well economies perform. I did reasonably well, though I was in no danger of getting drafted into academia. I played a lot of pool. During my orals, when one professor asked which economics journals I read, I replied that I had never read any. Seriously? Yes, seriously. The professor seemed incredulous. He decided my clear lack of interest in economics disqualified me from an honors grade.

  By the time I got my master’s degree in East Asian studies and international economics in 1985, I knew I wanted to try policy work with a global dimension. I had worked over the summer for the Overseas Private Investment Corporation, the U.S. government’s development finance arm—the successor to the USAID office where my father once worked—and I figured I’d try government work. But I turned down entry-level civil service jobs at the Commerce Department and a few other executive branch agencies. I applied for the Presidential Management Intern Program, a favored path to top executive branch civil service jobs, but I didn’t get it—perhaps because I botched the part of the interview that required role-playing in a fake government meeting, which seemed ridiculously forced and artificial to me. So I was still unemployed when Carole and I got married that summer at my family’s house in Orleans.

  But not long after we returned from our honeymoon in France, Henry Kissinger’s international consulting firm hired me as an Asia analyst; my dean at SAIS had recommended me to Brent Scowcroft, one of Kissinger’s partners. I went to work for Dr. Kissinger knowing that he was a controversial and complicated figure, but I thought of him mainly as the preeminent strategic thinker of his era, the architect of our opening to China. My basic foreign policy views were the establishment views of the realist tradition: a focus on national interests rather than idealistic moral goals, general support for market economies and free trade, an overarching sense that the world is a messy and dangerous place. Kissinger was the foreign policy establishment personified, and I was drawn to that ultimate insider world, perhaps more so because I had grown up as an outsider. His partners, Scowcroft and Lawrence Eagleburger, were also establishment internationalists who later served the first President Bush as national security adviser and secretary of state, respectively. They were imposing but smart, and Kissinger Associates seemed like an interesting place to start paying off my student loans.

  I was now supposed to be something of an Asia specialist. For a time, I ran a Washington group of Japan policy analysts called the Kabanmochikai, “the briefcase carriers club.” But I was daunted by how little I knew about my supposed topic of expertise. I mean, Asia was a vast and complex place. I’d seen more of it than most twenty-five-year-old Americans, but not a lot of it. I was writing memos that were supposed to help Henry Kissinger and his partners stay abreast of the politics and economics of the entire continent, and flying to New York once a month to brief them in person. But I knew virtually nothing about finance or business. And I had never worked in government, never stood in the shoes of the people making the policy choices I was reading and writing about.

  Kissinger Associates was a great three-year postgraduate education, but one thing it taught me was that I didn’t want to spend my life writing about what others were doing in government. I thought I should try doing it myself. I applied to the international division of the Treasury, which was at the center of what I thought were the most interesting policy issues of that time, and had a reputation for solid nonpartisan work. In August 1988, I accepted a civil service job in the International Trade Office of the Treasury Department. I was still a Republican—I voted for President Reagan in 1984 and George H. W. Bush in 1988—but I joined Treasury as a nonpolitical “career” civil servant, not a Reagan administration appointee. I was now a junior government official, a “GS-13,” a Washington bureaucrat.

  A few days after I started in my cubicle at the Treasury, Kissinger called me, one of the few times he ever did that. He was working on a book and had asked me to write two long essays on Chinese and Japanese foreign policy. He complimented my work, probably the first time he ever did that, and told me he needed additional research on Japan. When I explained that I worked for the government now, and couldn’t continue to work for him on the side, he didn’t sound happy and didn’t prolong our conversation. We didn’t have any contact for another fifteen years or so, until I was chosen to run the New York Fed, when he invited Carole and me to a private dinner. He joked that he had played an important role in my education in economics—he was proudly indifferent about economics—and would later take a lot of pleasure in claiming he had always known I would rise to great heights.

  If so, he might have been the only one. I was a seriously late bloomer. When I arrived at Treasury, I felt as underprepared as I had felt at Dartmouth. I still had no long-term career plan, either inside or outside the department. I just wanted to do interesting, hopefully consequential work. And after spending so much of my life apart from America, I wanted to work for my country.

  TWO

  An Education in Crisis

  The Constitution didn’t grant the executive branch much direct power over the domestic economy. But the Treasury has more influence in foreign economic affairs, and its international division, a group of about two hundred civil servants when I joined, was known as a great place to work on issues that mattered. My first assignment was to write an analysis of what European financial integration could mean for the United States, a topic I knew nothing about at the time, though I would grapple with its consequences two decades later. It was interesting stuff for a twenty-seven-year-old kid.

  My boss in the International Trade Office, a career civil servant named Bill Barreda, was my first really inspiring professional role model, a leader who made us feel connected to a mission larger than ourselves. He was smart and funny, without pretension. He rode his bike to
work. He gave us economics tutorials on a blackboard in his office overlooking the East Wing of the White House. He was a talented manager, too. Whenever we produced briefing books for Secretary Nicholas Brady, Barreda brought our entire team together over beers to do the hole punching as well as the proofreading, administrative staff alongside PhD economists.

  Barreda had an unstated technocratic code that I tried to adopt as my own: Focus on what’s right. Tell your bosses what you really think. Understand the politics, but don’t let it get in the way of figuring out the best policy on the merits. And never forget that our work affects the world. I worked for Barreda for only a year, but his get-the-right-answer ethic had a deep influence on me.

  My next job at Treasury was working for the U.S. negotiator in the first international trade talks on financial services, flying to Geneva once a month to help design a new set of rules for global markets. This felt like the next frontier in economic policy, as more powerful rivers of capital were starting to flow across borders, and unlikely countries were opening their markets to foreign investment. And I was the guy with the “pen,” keeping the drafts of the agreement on my IBM PC. I liked the feel of creating something new, starting from a blank slate. I also enjoyed the dance of diplomacy, the consensus building with foreign negotiators as well as the U.S. financial regulators whose support we would need for a deal.

  In June 1990, Carole and I moved to Tokyo, and I started an even more interesting job as the assistant U.S. financial attaché in Japan. We stopped in Hawaii for a few days on our way to Tokyo, and a Salomon Brothers economist later told me I had looked like a kid who had just gotten off a surfboard when I arrived. In Japan, the Ministry of Finance is the most powerful and venerated government agency, and civil servants spend decades climbing its hierarchy. I was twenty-nine, definitely not what they expected from the U.S. Treasury. Although I had covered Japan for Kissinger, and I could read a newspaper in Japanese with some difficulty, I knew enough to know that I didn’t know that much about Japan. And only a month after we arrived in Tokyo, the attaché unexpectedly left for a new job in Washington, leaving me in charge with almost no help at a fraught moment in U.S.-Japanese economic relations.