Source: Wall Street Journal

Federal Reserve leadership is overly male, almost entirely white and drawn too frequently from the banking community, according to a group critical of the central bank.

A new report from the Center for Popular Democracy’s Fed Up campaign analyzes the types of people populating the Fed’s Washington-based board of governors, the regional bank presidencies and the regional bank boards of directors.

The report notes that all voting members of the central bank’s rate-setting Federal Open Market Committee and nearly all the regional bank presidents are white. Just two of the 12 presidents and two of the five governors are women.

“These key decision-making bodies remain dramatically unbalanced and unrepresentative of the vast majority of people who participate in the economy,” said the group, which has called for more public input into the selection of regional bank presidents and their performance evaluations.

The center said the composition of the Fed’s leadership bodies violates the spirit of the law that created the central bank, which calls for membership drawn from many different industries and interests.

A Fed spokesman responded to the criticism about the regional bank boards by saying the central bank has “focused considerable attention” to finding directors “with diverse backgrounds and experiences” that represent agriculture, commerce, industry, services, labor and consumers, as the law requires.

“We also are striving to increase ethnic and gender diversity,” the spokesman said, noting a rise in minority representation on the boards from 16% in 2010 to 24% today. Female representation has risen from 23% to 30% over the same period, and all told, 46% of regional directors now are either a woman or a member of a racial minority, the spokesman added.

Fed Chairwoman Janet Yellen is the central bank’s first female leader.

The Fed Up group, with a membership drawing heavily from labor unions and community organizations, is a regular critic of the central bank. It has argued in recent months that the Fed shouldn’t raise short-term interest rates and has pressed its case in private meetings with Fed officials. Several of its members appeared outside the central bank’s research conference in Jackson Hole, Wyo., last year to call attention to their views.

The group’s concern about a dearth of diversity at the Fed has been echoed by former Minneapolis Fed chief Narayana Kocherlakota. He argued in a blog post last month the central bank has appeared to give short shrift to racial concerns in part because there have been almost no African-Americans in its policy-making ranks. He wrote that the concerns of racial minorities have been “underemphasized” at the Fed.

The last African-American to serve on the Fed board was Roger W. Ferguson Jr., who served as a governor between 1997 and 2006 and as vice chairman from 1999 to 2006. The first African-American to serve as a Fed governor was Andrew Brimmer, from 1966 to 1974.

The report showed particular concern about the directors on the regional Fed bank boards, which are drawn from the private sector. It said 83% are white, compared with around two-thirds of the total U.S. population.

“The diversity of regional board members is meant to inform the bank presidents, who in turn, participate in discussions and vote at the FOMC,” the report said. “However, the boards, the presidents, and the FOMC fail to represent their region’s racial diversity.”

The report also said its analysis found that representatives of banking and what it calls commercial interests have increased their share of regional Fed board seats in recent years. Representatives of community groups and labor unions account for fewer than 5% of the available board seats, according to the center.

Among the regional Fed bank boards’ most high-profile roles is selecting their bank presidents. Recent regulatory changes now bar directors from participating in that process if their firms are regulated by the bank.

The directors also provide information to bank officials about local economic conditions and give advice on running the banks.