An activist group is blasting the Federal Reserve, not for its monetary policy or economic projections, but for lacking diversity and having too many bankers.
A campaign called Fed Up comprised of community organizers and labor union interests warns of a “disturbing reality” uncovered in their research, mainly that the central bank is dominated by white males from the banking sector. In its report the group cites huge racial, gender and class divisions it sees within the Federal Reserve and prescribes broad quota-based solutions on how the Fed can immediately begin to rectify the inequality.
“Designed to bring voices from diverse economic perspectives to the table, Federal Reserve directors have historically—and dramatically—failed to adequately represent communities, consumers, employees, women, and people of color,” reads the reports. “While 63 percent of the nation’s population is white, 83 percent of Federal Reserve board members are white.”
Fed Up observes that the Federal Open Market Committee (FOMC), the only voting members on Federal Reserve interest rate policy, are all white. The group cites The Federal Reserve Act of 1977 which aimed at ending discriminatory practices when hiring and states that “due but not exclusive consideration” must be given to everyone, regardless of race, gender, creed, national origin or even what sector of the economy they come from, reports The Wall Street Journal.
The goal is for full demographic and economic representation within the decision-making body that guides America’s economy. Another point of criticism from Fed Up was the gender dynamics at work in the Federal Reserve. Research shows that 83 percent of regional Federal Reserve presidents and 60 percent of FOMC voting members are men. Janet Yellen became the first female to chair the Federal Reserve when she replaced Ben Bernanke in 2014.
Industry diversity is another grievance leveled against the Fed by the activist group. Curiously, Fed Up worries the central bank, emissary to the world for the U.S. dollar, is comprised of far too many individuals from the banking community, reports Market Watch.
“While many of the Federal Reserve Bank presidents have spent their entire careers staffing the Federal Reserve and/or bodies of federal government, banking is the next most common career path to a Fed presidency,” reads the report.
The Federal Reserve has drawn criticism across the financial industry for its recent decision to raise interest rates in December due to the chaos that has gripped markets since. Concern that the world’s most consequential central bank is mostly comprised of bankers is not a critique usually heard.
Fed Up has a list of steps the Federal Reserve can take to reform its internal structure. The Federal Reserve has what are called Class A, B and C directors on regional boards. Class A directors represent the interests of member banks while Class B and C represent community interests. Fed Up encourages changes be made to rules guiding Class B and C directors to expand representation, specifically from labor unions and community organizing groups, but also from academia.
“Each regional board should include among its Class B and Class C directors at least one member from a university or a policy think tank,” the report states. “Currently 6 regional board members are attached to academic institutions in various capacities, and some regions make a regular practice of including academics. This is a best practice that can be built upon.”
A Federal Reserve spokesman hit back at the critical report, citing its history of progress and that racial representation at the central bank has increased by 8 percent since 2010.
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