Top Democratic lawmakers are piling pressure on the Federal Reserve Bank of New York to consider a diverse slate of candidates as the search for its next president enters a critical phase.
A letter, signed by eight Democrats on the Senate Banking Committee, was sent last week to the leaders of the New York Fed's search to replace William Dudley, who plans to step down this year.
"Given the New York Federal Reserve Bank's central position in the Federal Reserve System, we believe the search for its president should be as thorough and as inclusive as possible," Sherrod Brown, Elizabeth Warren and six other senators wrote in the Feb. 27 letter to Sara Horowitz and Glenn Hutchins, co-chairs of the search committee.
The New York Fed chief holds one of the most powerful roles at the U.S. central bank, acting as its eyes and ears on Wall Street and wielding a permanent vote on monetary policy. A New York Fed spokesman declined to comment on the search process.
The move is part of a broader push to shake up the regional Fed president selection process. House Democrats sent a Feb. 26 missive with a similar message, and the advocacy group Fed Up is planning a March 12 protest at the New York Fed, where they will call on the search committee to allow for a public town hall to discuss the selection process.
Together, the actions show that both politicians and activists view the reserve banks as part of national policymaking process and are demanding more input, transparency and representation. The New York Fed is a key case because it both oversees and aids Wall Street's biggest banks.
"The New York Fed president is a particularly powerful role with a permanent vote on the committee and the main regulator of the financial system," said Julia Coronado, founder of Macropolicy Perspectives LLC and a member of the New York Fed's economic advisory panel. "It is not surprising with that power, politicians are asking for accountability."
Members from the search committee met with Fed Up on Jan. 10, said campaign manager Jordan Haedtler. Horowitz and Hutchins were in the meeting.
The shortlist that's emerged in the press includes black men and women, but also features what the campaign sees as Fed insiders, like Brian Sack, former head of the New York Fed's markets desk. Simon Potter, who currently holds that position, is also on the list.
Other frequently reported short-listers include Mary Miller, a U.S. Treasury official in the Obama administration and a former T. Rowe Price Group Inc. executive; Peter Blair Henry, Dean Emeritus of New York University's Leonard N. Stern School of Business; and UBS Group economist Seth Carpenter, a former senior adviser at the Fed board in Washington.
Fed Gov. Lael Brainard's name is also making the rounds as a potential fit for the job, but it's not clear whether she'd be interested or whether she's been approached about the role. Fed spokeswoman Michelle Smith had no immediate comment.
When Fed Up members met with the search committee, they floated some names of their own: among them, former Treasury Deputy Secretary Sarah Bloom Raskin.
Finding a perfect candidate is no easy task. The New York Fed oversees banks and operates in markets, so someone with Wall Street experience is ideal. At the same time, it's important to find a candidate who isn't beholden to the banks.
And lawmakers have no real sway in the selection. Neither President Donald Trump nor Congress — who appoint and approve the seven governors who sit on the Fed's Board in Washington — decides who leads the Fed's 12 regional banks. Regional Fed directors, who are chosen by banks and the Fed board to represent the public, get to make those picks.
The Senate letter, however, shows increasing interest by politicians in the reserve banks, especially the New York Fed given its permanent vote.
"There is a lot to be said for the idea that the New York Fed with a permanent vote is akin to being a governor and should be subject to presidential appointment and Senate confirmation," said Philip Swagel, an economics professor at the University of Maryland. "It is effectively an eighth governor."
Diversity in central bank picks has been in particular focus after Trump named three white men to spots on the Fed's politically appointed board in Washington, including picking Jerome Powell to replace Janet Yellen as chair, the first woman to hold that role, and after the Richmond Fed's recent search ended with a white male president.
While the lawmakers' push is new, the search committee has said that it's focused on diversity from the start. In addition to Spencer Stuart, they specifically hired Bridge Partners — which focuses on diversity — to help lead the process. Their website explains how they're operating in detail.
The committee has previously said that it expects to wrap up in mid-2018, assuming it finds a good candidate. Once that selection is made, the name will be sent to the Fed board in Washington for final approval.