03.26.2018

In response to recent reports that the New York Federal Reserve Board has chosen John Williams as the next President of the New York Federal Reserve, the Fed Up campaign released the following statement from Director Shawn Sebastian:

The Fed Up Coalition would be deeply disappointed if John Williams was appointed as the next president of the New York Federal Reserve because of his views on monetary policy, his record on regulation, the failure to appoint someone who represents the diversity of the district and the opaque process by which he was selected.

The search for the next New York Fed president began with commitments to diversity and gestures toward public engagement and has ended with the appointment of Williams, a white, male, Fed insider who had never been mentioned before. The public had no chance to ask a single question about Williams’s dismal record on maximum employment and regulation. The process for selecting the President of the New York Federal Reserve was plagued with conflicts of interest and was dominated by the financial industry. The public clearly articulated what we wanted in a New York Fed president, and we were ignored.

John Williams has consistently underestimated maximum employment. If Williams had the permanent FOMC vote and influence of the New York Federal Reserve presidency over the past several years, millions of people who have jobs today would be unemployed. Williams is a failed regulator. If Williams could not stop Wells Fargo, how can he supervise and regulate the biggest, most complex, and powerful financial institutions on Wall Street?

Given the importance of the New York Fed president, conflicts of interest in process, and how little public input impacted the decision, Fed Up and our partners will aggressively pursue federal legislation to reform the Federal Reserve. The New York Federal Reserve can and should restart the process to choose a New York Federal Reserve president who prioritizes full employment, has proven they can effectively regulate Wall Street, and who reflects the diversity of the region.

See below for background on the above statement:

The process for selecting the President of the New York Federal Reserve was plagued with conflicts of interest and was dominated by the financial industry. The New York Federal Reserve failed to prevent the last crisis because of its closeness and deference to the financial industry. Just ten years after that failure, the New York Fed again allowed conflicts of interest with Wall Street to shape its most important decisions. Post-Dodd-Frank, representatives of the public are supposed to lead the process to select a new president to minimize the influence of the financial industry, but the New York process was inconsistent with previous searches. Glenn Hutchins, a private equity investor and Class B director chosen by the banks was appointed as co-chair of the search committee. Since Dodd-Frank, the only previous time a Class B director was allowed to lead a search committee was characterized by a major conflict of interest when the Dallas Federal Reserve selected Robert Kaplan, a member of the board of Heidrick & Struggles, the executive search firm hired by the Dallas Fed.

Furthermore, David Cote, one of just four members of the search committee, stepped down from the New York Federal Reserve Board on March 20 to pursue opportunities on Wall Street that would conflict him out of serving on the New York Federal Reserve board. Given the timeline, Cote appears to have selected the next New York Federal Reserve President while simultaneously pursuing and negotiating his next career moves on Wall Street. Ten years after the catastrophic failure to prevent the crisis, the dominance of the financial industry continues and has marred the search for the next New York Fed president.

The public clearly articulated what we wanted in a New York Fed president, and we were ignored. From the very beginning, community groups, labor, and advocacy organizations and elected representatives of the public were unified that the next New York Federal Reserve President should prioritize full employment, have the capacity to effectively regulate Wall Street, and reflect the diversity of the region, and we demanded a public forum to provide input. If the the New York Fed chooses Williams, it will have failed to meet the demands of the public on every count. We reiterated this message in meetings with the New York Board, public letters from Senators, Representatives, local electeds in the region, and community groups, as well as reports, and even protests and hashtags. If this New York Federal Reserve Board can ignore all of this, the system and the process must change.

John Williams has consistently underestimated maximum employment. If Williams had the permanent FOMC vote and influence of the New York Federal Reserve Presidency over the past several years, millions of people who have jobs today would be unemployed. In February 2015 Williams predicted we'd be at full employment before the end of the year and he reiterated that position in March 2015. In March of 2016 he was pushing for earlier and more rate hikes and in May of 2016 he cried wolf again that we had reached maximum employment.

Williams is a failed regulator. If Williams could not stop Wells Fargo, how can he supervise and regulate the biggest, most complex, and powerful financial institutions on Wall Street? Wells Fargo illegally opened two million accounts without customer authorization between May 2011 and July 2015. While Wells Fargo was fleecing its customers under Williams’s nose, the San Francisco Fed appointed its CEO John Stumpf to represent the 12th District on the Federal Advisory Council to the Board of Governors for 2015 and then reappointed Stumpf in 2016. It took action by the Senate for Stumpf to step down as the San Francisco Fed’s representative.

Given the importance of the New York Fed president, conflicts of interest in process, and how little public input impacted the decision, Fed Up and our partners will aggressively pursue federal legislation to reform the Federal Reserve. Most of the presumed candidates in the 2020 presidential election weighed in publicly or privately on the New York Federal Reserve appointment, including Kristin Gillibrand, Cory Booker, Elizabeth Warren, and Bernie Sanders. Last year both Hillary Clinton and Bernie Sanders endorsed Federal Reserve reform and Federal Reserve reform was included in the Democratic Party platform in 2016. If the the New York Federal Reserve Board follows through with appointing Williams, they will have confirm the need for legislative reform of the Federal Reserve.

The New York Federal Reserve can and should restart the process to choose a New York Federal Reserve President who prioritizes full employment, has proven they can effectively regulate Wall Street, and who reflects the diversity of the region. William Dudley's term technically ends January 2019. There is no reason the New York Federal Reserve Board can't restart this process to choose the right candidate.

Media Contact:

Tyler Prell, tprell@populardemocracy.org, 202-210-1203