WASHINGTON — Democratic front-runner Hillary Clinton joined congressional Democrats Thursday in calling on the Federal Reserve to take steps to increase the diversity among heads of the regional banks, saying the existing system has disproportionately underrepresented women and minorities.
In a letter sent to Fed Chair Janet Yellen on Thursday, 112 Democrats in Congress and 11 Democratic senators called on the bank to "engage in an inclusive process to consider candidates from a diverse set of backgrounds, including a greater number of African-Americans, Latinos, Asian Pacific Americans, women, and individuals from labor, consumer, and community organizations" when considering future regional bank presidential vacancies. The letter was led by Sen Elizabeth Warren, D-Mass., and Rep. John Conyers, D-Mich.
The letter noted that of the 12 regional Fed bank presidents, 10 are men and 11 are white, and an African-American has never been tapped to head a regional Fed bank. That pattern continues throughout leadership ranks of the board and its regional banks — 83% of head office board members are white, as are 75% of regional bank directorships. Those statistics bely the Fed's congressional mandate to "represent the public, without discrimination on the basis of race, creed, color, sex, or national origin," the letter said.
"When the voices of women, African-Americans, Latinos, Asian Pacific Americans, and representatives of consumers and labor are excluded from key discussions, their interests are too often neglected," the letter said. "We remain deeply concerned that the Federal Reserve has not yet fulfilled its statutory and moral obligation to ensure that its leadership reflects the composition of our diverse nation in terms of gender, race and ethnicity, economic background, and occupation, and we call on you to take steps to promptly begin to remedy this issue."
In a statement to The Washington Post, a spokesman for the Clinton campaign said the former secretary of state agrees with the letter's position — and that of her rival for the Democratic nomination, Sen. Bernie Sanders, D-Vt. — and wants to see the Fed system populated by a more diverse array of stakeholders, not just the banking industry. Sanders called for a wide revamping of the Fed's makeup in a speech in New York in January.
"The Federal Reserve is a vital institution for our economy and the well-being of our middle class, and the American people should have no doubt that the Fed is serving the public interest," Jesse Ferguson told the Post. "That's why Secretary Clinton believes that the Fed needs to be more representative of America as a whole and that commonsense reforms — like getting bankers off the boards of regional Federal Reserve banks — are long overdue."
In response, a Fed Board spokesperson said that "The Federal Reserve is committed to fostering diversity — by race, ethnicity, gender, and professional background — within its leadership ranks" and that diversity at the central bank is improving.
The spokesperson added that "minority representation on Reserve Bank and Branch boards has increased from 16% in 2010 to 24% in 2016. The proportion of women directors has risen from 23% to 30% over the same period."
In the letter to Yellen, the lawmakers asked the Fed to consider diversity issues as it begins its search for regional bank directors in 2017. It also asked that "as you make crucial monetary policy decisions in 2016, we urge you to give due consideration to the interests and priorities of the millions of people around the country who still have not benefited from this recovery" as the unemployment rate remains much higher among minorities than whites.
The Fed spokesperson responded: "By law, we consider the interests of agriculture, commerce, industry, services, labor, and consumers. To bring a variety of perspectives to Federal Reserve Bank and Branch boards, we have focused considerable attention in recent years on recruiting directors with diverse backgrounds and experiences."
The letter comes nearly a year after the Fed's inspector general issued a report outlining 11 recommendations for the board to improve diversity among its employees. And there has been an increasing groundswell over the last 18 months for the Fed to expand its cloistered approach to appointing regional bank heads. Yellen in November 2014 met with a coalition of left-leaning organizations called Fed Up, which sought a more inclusive process for naming regional bank heads, among other demands.
Clinton's apparent embrace of the left's calls for a shake-up at the upper ranks of the Fed signals a new approach to her critics, bolstering her credentials as a tough critic of the banking system rather than dismissing the issue or offering less dramatic alternatives.