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,