This was a letter recently released by U.S. Senator Elizabeth Warren (D-MA) and U.S. Representative John Conyers (D-MI) and was signed by 116 Members of the House of Representatives and 11 senators. Doing counterproductive things to destabilize global economics and disrupt the proper functioning of capital markets should in no way be the exclusive purview of white men as Federal Reserve Chairperson Ms. Yellen seems to be ably proving. Yes, the virginity of the independence of the Federal Reserve has long been lost, if indeed it ever existed. But the real goal of this effort—a 100% focus on full employment and nary a word about inflation—remains very troubling.
May 12, 2016
Dear Chair Yellen,
We write to thank you for your strong leadership at the Federal Reserve throughout your historic tenure. Beginning with your first public speech in Chicago, you have placed crucial renewed emphasis on the importance of building a full employment economy, which will raise Americans’ wages and combat inequality. And you have displayed an appreciation for the fact that, as you have said, “there are real people behind the statistics, struggling to get by and eager for the opportunity to build better lives.” Over the past two years, thanks in no small part to your leadership and that of President Obama, our economy has added more than 5.5 million new private-sector jobs.
However, despite these gains, 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 1977, Congress responded to concerns that monetary policy was being set by a body that fell short of reflecting the diverse makeup of the United States by passing a law that requires the Federal Reserve to “represent the public, without discrimination on the basis of race, creed, color, sex, or national origin, and with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor and consumers.” Nearly 40 years later, the leadership across the Federal Reserve System remains overwhelmingly and disproportionately white and male, while major financial institutions and corporations are overrepresented in senior roles.
According to a study by the Center for Popular Democracy released in early February, 2016, 83 percent of Federal Reserve head office board members are white, and men occupy nearly three-fourths of all regional bank directorships. The lack of public representation on regional Banks’ boards is even more distressing in light of the lack of diversity among regional Bank presidents and the resulting lack of diversity on the Federal Open Market Committee (FOMC). Currently, 92 percent of regional Bank presidents are white, and not a single president is either African-American or Latino. Moreover, at present 100 percent of voting FOMC participants are white, while 83 percent of regional Bank presidents and 60 percent of voting FOMC members are men.
In addition to racial and gender disparities, we are also concerned with the persistent lack of occupational diversity. Despite the important role they serve in reflecting the interests of working families, only 11 percent of the Federal Reserve’s regional Bank directors come from community, labor, or academic organizations. By contrast, 39 percent of all regional directors represent financial institutions, and 47 percent represent firms in commerce, industry, and services.
Given the critical linkage between monetary policy and the experiences of hardworking Americans, the importance of ensuring that such positions are filled by persons that reflect and represent the interests of our diverse country, cannot be understated. When the voices of women, African-Americans, Latinos, and representatives of consumers and labor are excluded from key discussions, their interests are too often neglected.
For example, it is widely accepted that employment discrimination against women and minorities decreases as our economy approaches full employment. The data is unambiguous: even when comparing workers with the same levels of education, African-American workers face higher unemployment rates and are paid less than their white counterparts, women make less than their male counterparts, and women of color are particularly disadvantaged. A recent study by the Economic Policy Institute confirmed the importance of full employment for African-Americans, demonstrating that for every .91 percent reduction in unemployment for whites, black unemployment drops 1.7 percent. This reality is particularly relevant today, as the unemployment rate for African-Americans (8.8 percent) is currently more than double the unemployment rate for white Americans (4.3 percent), with Hispanics also suffering worse unemployment rates (6.1 percent).
By fostering genuine full employment, the Federal Reserve can help combat discrimination and dramatically reduce the disproportionate unemployment faced by minority populations. Unfortunately, it seems that this perspective is missing from FOMC deliberations. Reflecting on his experience on the FOMC in a recent blog post, former Minneapolis Federal Reserve President Narayana Kocherlakota wrote: “There is one key source of economic difference in American life that is likely underemphasized in FOMC deliberations: race.” He reviewed the most recent full year of FOMC meeting transcripts available (2010), and found that “there was no reference in the meetings to labor market conditions among African-Americans,” although the unemployment rate for African-Americans never dropped below 15.5 percent during that year. It is unacceptable that discussion of the job market for these populations would be an afterthought, or worse, ignored entirely, and we are concerned that the lack of balanced representation may be a significant cause of this oversight.
We are grateful that you pledged to consider African-Americans for future positions as regional Bank presidents during your recent Humphrey-Hawkins testimony before Congress, and appreciate your concern that no African-American has led a regional Bank to date. While some recent progress has been made, the Federal Reserve still has considerable work to do in order to comply with both the letter and spirit of the requirements of the Federal Reserve Act that seek to ensure fairness in the representation within the leadership of the Federal Reserve.
On February 19, 2016, the Federal Reserve announced that 10 regional presidents (eight men and two women, all white) had been re-appointed to new five-year terms. Despite the importance of this decision, there appears to have been no public consultation, and limited transparency regarding the metrics and criteria used to evaluate the presidents’ performance, or in the decision to reappoint them. As the Board of Governors embarks on its search for regional Bank directors to serve beginning in 2017, and as you consider future regional president vacancies, we urge you to engage in an inclusive process to consider candidates from a diverse set of backgrounds, including a greater number of African-Americans, Latinos, women, and individuals from labor, consumer, and community organizations.
Moreover, 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. We share the vision that you laid out in Chicago two years ago: an economy in which all working families “get the chance they deserve to build better lives.”
Thank you for your continued pursuit of these vital goals.
Members of Congress
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