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04/17/2018 | Building a National Campaign for a Strong Economy: Fed Up

A Collaboration to Strengthen the United States Federal Reserve System

April 16, 2018

 

Alexander R. Mehran

Chair of the Board

Federal Reserve Bank of San Francisco

 

Dear Mr. Mehran:

We are writing to offer you our view about the urgency of appointing an individual who deeply understands the economic realities facing working class Americans to serve as President of the Federal Reserve Bank of San Francisco.

For all of the dynamism and strength of the US economy, it has come to be characterized most fundamentally by enormous disparities in wealth, income and opportunity that strongly correlate to race, ethnicity and geography. Failing to address significant disparities in income and net worth between major segments of our population, and particularly in segments that are driving our nation’s demographic growth, will result in a less globally competitive US economy. This is a significant economic risk for the 12th District and the United States.

The San Francisco Fed will be strengthened by having a President whose experience and expertise better reflect the large segments of our population that are not proportionally experiencing the benefits of our economy. Ensuring that this expertise and perspective is represented within the Fed is a critical way to prepare for the challenges and opportunities in our economic future. This will require considering candidates with more diverse experience including in the fields of community development and philanthropy. We submit that the San Francisco Fed has a historic opportunity to name the first Hispanic, East Asian American or Pacific Islander President of a Federal Reserve Bank.

We applaud Chairman Powell's insightful comments on the necessity for diversity in Federal Reserve System and the larger economics profession. In his testimony before the Senate Banking, Housing and Urban Affairs Committee on November 28th, 2017, he stated, “We make better decisions when we have diverse voices around the table—both at the Board of Governors and at the Reserve Banks…We’ve seen what works. It’s about recruiting. It’s about going out of your way. It’s about bringing people in. Once they’re in, it’s about giving them paths for success. And it’s about having an overall culture and company that is very focused on diversity and sticks with that focus for a long period of time. That works.” This recognition must be coupled with bold leadership and action.

In order to decide the course of monetary policy through an informed assessment of different regional economic conditions from diverse points of view, the Federal Reserve System was designed to be decentralized, independent and include representatives of the public in its governance. The Fed’s mission is undermined when regional Reserve Banks fail to recruit leaders who live up to the mandate to “represent the public.” Selections that fail to allow meaningful opportunities for public input and engagement have tended to result in the elevation of Fed insiders. This insularity undermines the Fed’s public credibility and increases the likelihood that Congress will ultimately intervene to reform the process. The process for selecting the President of the New York Fed perpetuated the status quo. We urge the San Francisco Fed to avoid the same mistake. As a first step, we call on the San Francisco Fed to include the Chair of its own Community Advisory Board in the official selection committee for the next President.

Please accept this letter as an offer of support. We will do anything we can to help identify strong candidates as well as to publicly support actions that the San Francisco Fed takes to ensure progress on diversifying its Board of Directors and executive leadership.

Thank you for your service to the 12th District and our nation.

Respectfully submitted,

California Reinvestment Coalition
Center for Popular Democracy
Chicanos Por La Causa
Community Council of Idaho
Greenlining Institute NALCAB – National Association for Latino Community Asset Builders
National Coalition for Asian Pacific American Community Development
TELACU

cc: Jerome Powell, Chairman, Board of Governors of the Federal Reserve
Lael Brainard, Governor, Board of Governors of the Federal Reserve
Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve

 

San Francisco Fed Board Chair Alexander Mehran's April 20 Response to Coalition Outreach re: Collaboration Surrounding San Francisco Fed Presidential Appointment

April 20, 2018

Noel Poyo 
Executive Director 
National Association for Latino Community Asset Builders 5404 Wurzbach Rd. 
San Antonio, TX 78238 
 
Dear Mr. Poyo: 
 
Thank you for your letter of April 16, 2018, concerning the appointment of the next President and Chief Executive Officer of the Federal Reserve Bank of San Francisco. We appreciate your taking the time to reach out and share your perspectives on this important undertaking. As Chair of the Board of Directors for the Federal Reserve Bank of San Francisco, I know that I speak for all of my board colleagues in saying that the appointment of a Federal Reserve Bank President is among our most important responsibilities and one that we take very seriously. 
 
We share your desire to find a qualified candidate to fill this important role that understands and is able to represent the varied needs and interests of the richly diverse people and business communities throughout the Twelfth District. The Federal Reserve Bank of San Francisco has a legacy of success with regard to recruiting, developing and promoting women and minorities into leadership positions within its senior ranks. As you are well aware, Janet Yellen served as President and Chief Executive Officer of the Bank from 2004 to 2010 before going on to become Vice Chair and later Chair of the Board of Governors of the Federal Reserve System. Under President Williams' leadership, the Bank continued to strengthen its focus on diversity and inclusion at all employee levels but particularly an10ng its leadership ranks where women now occupy over 30 percent and minorities over 45 percent of senior­level roles. In addition, President Williams established the Bank's Community Advisory Council in 2017 to give even stronger voice to those representing the district's underserved communities and to contribute to his ongoing economic analyses and monetary policy views. 
 
The Federal Reserve Bank of San Francisco has set a high bar for its executive leadership that we fully intend to uphold. Our board has not yet publicly communicated about the selection committee, job specifications or the processes that we will undertake to gather a list of qualified candidates for this important role. We expect to do so in the near future and will keep you apprised of our progress. For now, please know that we are absolutely committed to gathering input from various community and business leaders like you and your colleagues regarding the appointment of the next President and Chief Executive Officer of the Federal Reserve Bank of San Francisco. 
 
While I appreciate your suggestion to include Mr. Matsubayashi, who chairs the Bank's Community Advisory Council, as part of the official selection committee, the Federal Reserve Act stipulates that only the Class B and Class C directors (those not affiliated with banks or financial institutions) are eligible to participate in the appointment process. As such, Mr. Matsubayashi is unable to serve in this capacity. However, we recognize that he is doing an outstanding job leading the Community Advisory Council, and we would greatly value his input and suggestions, as well as input from you and your colleagues, regarding qualified candidates for this important role. 
 
I wish to thank you once again for reaching out and offering your support of this important undertaking. We look forward to continuing this open, constructive dialogue, and with your support, doing all that we can to find the absolute best person from a diverse candidate pool to lead the Federal Reserve Bank of San Francisco. 
 
Sincerely, 
Alexander R. Mehran
Chair of the Board
Federal Reserve Bank of San Francisco and Federal Reserve Agent
 
cc: Danielle Beavers, Diversity and Inclusion Director, The Greenlining Institute 
David Adame, President and Chief Executive Officer, Chicanos Por La Causa 
Irma Morin, Chief Executive Officer, Community Council of Idaho 
Jerome Powell, Chairman, Board of Governors of the Federal Reserve 
Jordan Haedtler, Campaign Manager, Fed Up, Center for Popular Democracy 
Jose Villalobos, Senior Vice President, TELACU 
Lael Brainard, Governor, Board of Governors of the Federal Reserve 
Orson Aguilar, President, The Greenlining Institute 
Paulina Gonzalez, Executive Director, California Reinvestment Coalition 
Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve Seema Agnani, Executive Director, National Coalition for Asian Pacific American Community Development 
 
 

Coalition's Response to Chair Mehran's Letter

May 4, 2018

Alexander R. Mehran
Chair of the Board
Federal Reserve Bank of San Francisco

Dear Mr. Mehran:

Thank you for your letter dated April 20 and for your commitment to finding a San Francisco Fed president who “understands and is able to represent the varied needs and interests of the richly diverse people and business communities throughout the Twelfth district.”

We  appreciate  that  the  San  Francisco  Federal  Reserve  Bank  has  shown  its  commitment  to  public representation by strengthening diversity among Reserve Bank staff.  Unfortunately, that commitment has not extended to the position of President. Similarly, diversity and public representation on the San Francisco   Fed’s   governing   board   remains   lacking.   The  Twelfth   District  is   one  of   the  most demographically  diverse  districts  in  the  country,  yet  a  recent  analysis  by  the  Center  for  Popular Democracy found that the San Francisco Fed’s board of directors is the least diverse in the Federal Reserve System.

Your letter indicated that it would not be possible to include a Community Advisory Council member on the search committee because “only the Class B and C directors (those not affiliated with banks or financial institutions) are eligible to participate in the appointment process.” We would like to clarify our   request   regarding   Mr.   Matsubayashi’s   inclusion.      Following   established   precedent,   Mr. Matsubayashi can play a critical advisory role on the search committee by suggesting, interviewing, and advising on candidates under consideration. We are not suggesting or expecting that he would have final decision-making authority over which candidate is ultimately chosen.

The Federal Reserve Act clearly designates Class B and C directors as the final arbiters of who serves as president of each Reserve Bank.  We do not agree that inclusion of a member of the public on the search  committee would  in  any  way  violate the  law.  We have consulted  with  legal experts  on  the Federal Reserve Act, and they concur. Whenever a regional Reserve Bank encounters a presidential vacancy, it is customary to hire an executive search firm to identify and vet candidates who can fill that vacancy. We posit that employees of those executive search firms are participating in the search process. In 2014, outgoing Dallas Fed President Richard Fisher solicited the participation of non-Class B/C directors when he reportedly convened an advisory committee consisting of former Dallas Fed chairmen to help choose his successor.2  Freedom of Information Act requests have also revealed that members  of  the  Board  of  Governors  have  occasionally  suggested  candidates  to  fill  Reserve  Bank presidential  vacancies,  thereby  going  beyond  the  final  approval  role  that  the  Federal  Reserve  Act prescribes  for  governors.  We  fail  to  see  how  the  inclusion  of  Mr.  Matsubayashi  on  the  search committee in an advisory capacity is distinguished from these other examples of involvement by non- Class B and C directors in recent Reserve Bank presidential selections.

In your letter of April 20th, you identified the establishment of the Community Advisory Council as an important step toward giving an “even stronger voice to those representing underserved communities,” in the District.  The Council includes individuals selected by the San Francisco Fed itself as credible representatives  of  diverse  communities.    If  the  San  Francisco  Fed  is  unwilling  to  find  a  way  to meaningfully include a leading member of that advisory council in the selection process for the next President, it is difficult to understand how underserved communities are truly gaining a stronger voice.

It is also difficult to be assured that people of color will be given due consideration for the position of President when communities of color and other important segments of the District’s population are not adequately reflected in the selection process. Despite clear calls for consideration of diverse candidates from members  of  Congress  and  the public,  the  last  two  Reserve Bank  presidential vacancies  have resulted in the selection of white, male, longtime Fed insiders.  Including the Chair of the San Francisco Fed’s Community Advisory Council on the search committee in San Francisco is an essential step to maintain the credibility of the selection process for the next President of the San Francisco Fed.

In light of this clarification, we respectfully request that you consider including the Chair of the San Francisco Fed’s Community Advisory Council in the search process in a manner consistent with the Federal Reserve Act.  If the San Francisco Fed chooses not to accept this recommendation, we would appreciate an explanation as to why.  Regardless of your decision, we look forward to your continued collaboration  as  you  take  on  the  important  responsibility  of  finding  a  qualified  candidate  to  fill  a policymaking role of crucial importance to the public.

Thank you for your service to the 12th  District and our nation.

Respectfully submitted,

California Reinvestment Coalition
Greenlining Institute
Center for Popular Democracy
Community Council of Idaho
Chicanos Por La Causa
NALCAB – National Association for Latino Community Asset Builders National Coalition for Asian Pacific American Community Development TELACU

cc: Jerome Powell, Chairman, Board of Governors of the Federal Reserve
Lael Brainard, Governor, Board of Governors of the Federal Reserve
Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve