A woman wearing a face mask rides a scooter past the Federal Reserve in Washington, DC, United States on January 27, 2021.
Lie Jie | Xinhua News Agency | Getty Images
According to a report by a leading Washington think tank on Tuesday, the Federal Reserve has an “astounding” lack of diversity among its directors charged with running the central bank’s 12 districts.
“The Federal Reserve System … has a diversity problem,” said the Brookings Institution report, written by economists Peter Conti-Brown and Kaleb Nygaard. “This has long been evident at the top of the organization among the members of the Fed’s Board of Governors and the Presidents of the Federal Reserve Banks.”
While these senior Fed officials are “mostly white, mostly male,” the report said, the problem extends to the boards of directors of local operations, where “we find an amazing homogeneity between them, with only recent signs of one Diversification “.
Directors are also “mostly drawn from the business community in their districts, with little minority, women, or economic involvement – labor, nonprofits, academia – making major contributions to the governance of the Fed.”
The report notes that in the history of the central bank there have been only three black members of the Fed’s Board of Governors, one black regional president and only three non-white regional presidents.
There are currently two out of six female Fed governors – Lael Brainard and Michelle Bowman – and three out of twelve regional presidents – Esther George in Kansas City, Loretta Mester in Cleveland, and Mary Daly in San Francisco. There is only one black regional president, Raphael Bostic, of Atlanta.
In recent years, the Fed has made some progress on reserve bank directors, increasing the total number of women and minorities from 20 in 2017 to 27 this year. The total of reserve bank branches rose from 42 to 51 in the same period.
The report suggests that the Fed make the director selection process “more transparent” so that it can be evaluated in the selection of members.
“There is also a feeling that these principles are predominantly promoted from within, which poses a risk to groupthink and intellectual homogeneity,” wrote Conti-Brown and Nygaard.
Fed officials have been challenged repeatedly for a lack of diversity in their ranks.
Fed chairman Jerome Powell was interviewed on the matter during a hearing before the House Financial Services Committee in February.
“I would say we are not where we want to be,” said the central bank governor. “It’s something I am personally indebted to and where all of the Fed’s leadership and the entire Fed are very much focused on making our workforce more diverse.”
However, the problems go deeper than above.
Research by the authors, using the Fed’s own research, shows that women and minorities have been under-represented on regional boards since the bank was founded in 1914.
These bodies elect the regional presidents who help governors make decisions about interest rates and other aspects of monetary policy.
There were no non-whites serving as governors of the Fed until the late 1970s, and they were less than 10% of the board of directors in the second half of the last decade. It was not until the 1990s that women made up 10% of directors, as of 2019 it was 37%.
The study also found that manufacturing is underrepresented and that only 5% of directors have a PhD in economics.
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