Analysis: A popular Fed? It’s at least starting to look like this
SAN FRANCISCO, Jan 12 (Reuters) – Seven years ago white men made up the majority of directors on the boards of all but one of the 12 U.S. Federal Reserve banks. This year, white men are for the first time in the minority among everyone.
Of the 105 directors on newly appointed boards in 2022, 44% are women and a record 40% are black, Hispanic or non-white, according to a Reuters study. Board chairs and vice chairs were for the first time both majority women and majority people of color, and also for the first time two union leaders.
The changing face of Fed administrators comes at a critical time for the US economy, with runaway inflation and slowing job growth creating hardship for families, especially the less well-off.
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And it’s a critical moment for the institution charged with leading the nation’s monetary policy response: One-third of Fed banks will need new chairs within the next year.
Among the influential subgroup of directors eligible to choose new federal bank presidents who, in turn, set interest rates for the nation, a majority are women for the second year in a row, and a majority are women. people of color for the first time, according to Reuters data.
The Dallas Fed and Boston Fed are currently looking for replacements for two recently resigned presidents, both white men, with the Dallas Fed hosting a town hall on Thursday to seek public comment on the search process.
The presidents of the Fed Reserve Banks in Chicago and Kansas City, a white man and a white woman respectively, will reach mandatory retirement age next January. Their advice should begin research in the coming months.
In this context, these advances in terms of diversity within the regional boards are an important step for the Fed. For most of his 108 years, his leadership has come nowhere near reflecting the demographics of the country for which he is the most powerful force in shaping economic policy.
The gains are the result of years of pressure from Fed officials to attract more women and minorities to corporate boards to better reflect the nation as a whole, build credibility in particularly vulnerable communities in the event of an economic downturn and to promote better decision-making. on policy and attracting more diverse talent to Fed leadership positions.
“I’m really proud of what we’ve done,” Fed Chairman Jerome Powell told the National Community Reinvestment Coalition last May. “We worked hard for this.”
There is still a long way to go.
The Powell-led Fed board, which currently has five members, is all-white with only two women, and the normally seven-seat panel has never had more than three female members at any one time and only three black members. As appointments expected by US President Joe Biden as early as this week change the face of the Fed’s board in Washington, the ranks of regional bank presidents – half of whom are white and male – remain out of the direct reach of the presidential appointments.
These choices fall within the purview of the regional bank boards, with input and approval from the Fed Board.
Regionally, the boards of the San Francisco Fed and the Philadelphia Fed are the least diverse: each of their boards is made up of one-third women and one-third minorities. Boston — whose presidential search is underway — Chicago — whose search is expected to begin later this year — and Cleveland have majority female boards. The Dallas Fed, which is also seeking a new chief, is the only bank whose majority of board members are people of color.
PATHWAY TO BETTER POLICY
Diversity on federated bank boards is important, state bank presidents say, noting that having directors with different backgrounds provides important insight into the economy and the real effects of their policies .
“We make better policies when we have a diverse team,” San Francisco Fed Chair Mary Daly said earlier this month at a Central Bank of Ireland event, echoing research that affects all sectors.
With regard to the Fed in particular, a study published in early January suggested that various Fed bank boards were strongly correlated with increased local bank lending to low-income neighborhoods.
And Fed leaders hope that having more diverse boards at regional Fed banks is a step toward getting a more diverse group of Fed chairs.
Of course, this is not a magic formula.
The Cleveland Fed in 1988 was the last Fed bank to have a female director, according to data published by the Brookings Institution, but the first in 1982 to hire a female president and three of seven women to have been Fed presidents have led the Cleveland Fed.
The Minneapolis Fed board was the second-to-last to have a nonwhite director, but hired two of the three nonwhite bank presidents.
“I believe in the future it will be much more important and the (board) will be more aware of diversity, but it is certainly not one-to-one,” said Kaleb Nygaard, partner at senior researcher at Yale’s Financial Stability Program who, along with Peter Conti Brown, has studied federal bank boards and is among those who denounce the Fed for its lack of diversity.
“Our country’s central bank should be led by people who not only look like our diverse country, but also have backgrounds that represent all areas of the economy,” he said.
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Reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Andrea Ricci
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