Two Vacancies Among Fed Regional Presidents... Will the Second Black Leader Emerge?

Only Three People of Color Have Served as Presidents in 108 Years... Chairman Powell Emphasizes 'Diversity'

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed) [Photo by Reuters-Yonhap News]

[Asia Economy Reporter Byunghee Park] Jerome Powell, chairman of the U.S. central bank, the Federal Reserve (Fed), said at the House Financial Services Committee hearing on the 30th of last month (local time) regarding the two vacant regional Fed president positions, "We will double our efforts to find diverse candidates." This remark referred to the Fed's diversity expansion issue that Chairman Powell has emphasized so far, making it highly likely that the second-ever Black regional Fed president will emerge.

The Brookings Institution, a U.S. think tank, released a report in April pointing out the lack of diversity in the Fed. According to the report, in the 108-year history of the Fed, there have been three Black Fed board members and only one Black regional Fed president. Raphael Bostic, who took office as president of the Atlanta Fed in 2017, was the first Black regional Fed president in the Fed's 104 years since its establishment. Even when broadening the scope to people of color, only three regional Fed presidents have been non-white to date.

The Fed, composed almost entirely of white individuals, has always been criticized for its lack of diversity. Chairman Powell has continuously emphasized expanding diversity since his inauguration. With two regional Fed president positions now vacant, the Fed has an opportunity to increase diversity. Robert Kaplan, president of the Dallas Fed, and Eric Rosengren, president of the Boston Fed, who caused controversy over stock investments, announced their resignation intentions on the 27th of last month.

At the House hearing, in response to a question from Joyce Beatty (Democrat, Ohio), a Black female congresswoman, Chairman Powell said, "I can clearly state that we will strive to find diverse candidates and provide fair opportunities to candidates in the process of filling the two vacant regional president positions," adding, "This is a very focused area."

However, the central Fed's influence in the regional Fed president appointment process is limited. Regional Fed presidents are appointed with the approval of the central Fed board, but candidates for president are nominated by each regional Fed board.

The regional Fed board consists of nine members. Three of these are nominated by regional bank shareholders and thus represent the interests of regional bank shareholders. Additionally, three directors are elected by regional member banks, representing the public interest. The remaining three are nominated by the central Fed and also represent the public interest. Although six of the nine regional Fed board members are selected from the private sector, the system is structured so that public and private sectors can mutually check each other under the pretext of representing the public interest.

While there is an advantage in gathering diverse views through the 12 regional Feds, which have both private and public characteristics, there are also criticisms that the central Fed is overly influenced by the regional Feds, where private sector influence is not insignificant. Due to the strong private sector influence, regional Feds are sometimes criticized as social clubs for regional banks. The closed system has also been pointed out as the reason why no Black president emerged for 104 years until Bostic was appointed in 2017.

Katherine Judge, a professor at Columbia Law School, pointed out, "Regional Feds exist in a gray area, neither fully public nor fully private institutions," adding, "It is a perplexing aspect given the important role regional Feds play in the public sector."

This content was produced with the assistance of AI translation services.