05.12.2016

WASHINGTON -- U.S. Senator Elizabeth Warren (D-MA) and U.S. Representative John Conyers (D-MI) Thursday released a letter signed by 116 Members of the House of Representatives and 11 senators urging the Federal Reserve to reform its governance by committing to more diverse leadership and prioritizing full employment for all communities. The letter represents a major development in the Congressional-Fed relationship and a sign of increasing interest on Capitol Hill for rigorous Fed oversight and reform.

Addressed to Fed Chair Janet Yellen, the letter calls attention to the lack of diversity across the Federal Reserve system. White men from the financial and the corporate sectors dominate Fed governance in Washington D.C. and around the country, according to a study conducted by the Center for Popular Democracy for the Fed Up coalition.

“The overwhelming support for this letter demonstrates that Members of Congress want to see a Federal Reserve that truly represents the American people - and that makes sure the economy works for all with a mandate for full employment,” said Connie Razza, author of the report cited by the Congressional letter and Campaign Director at the Center for Popular Democracy, which coordinates the Fed Up coalition. "As it becomes clear that the recovery has yet to reach many millions of Americans, the momentum behind this cause is growing. Now it’s time to hear from all of our Presidential candidates. Do Hillary Clinton and Donald Trump believe that the Fed should do a better job reflecting the American people?”

The letter comes amid growing attention to the governance practices of the Fed by Democrats and progressives. In February, at her testimony in front of the House Financial Services and Senate Banking committees, fifteen Democratic members of Congress asked Chair Yellen questions about racial disparities in the economy and lack of diverse leadership in Fed governance. The Fed Up coalition, comprised of community-based organizations, labor unions, and policy advocates from around the country, has over the past eighteen months turned Fed governance and policy into an important issue for the progressive movement.

The letter’s signatories include Democratic Presidential candidate Senator Bernie Sanders (VT), every Democratic member of the Congressional Black Caucus, as well as a significant percentage of the Congressional Hispanic Caucus, and House Financial Services Ranking Member Maxine Waters (D-CA), Senator Dick Durbin (D-IL) and Rep. James Cleburne (D-SC), who are members of the Democratic Party’s leadership.

Currently, 11 of the 12 regional Federal Reserve Bank presidents are white and 10 of the 12 are men. Not a single regional Bank president is Black or Latino and, indeed, there has never been an African American president of a regional Bank in the history of the Federal Reserve System. This year, all voting members of the interest rate-setting Federal Open Market Committee (FOMC) are white.

The Congressional letter quotes from a former regional Fed president and argues that the lack of diverse leadership is hurting the Fed’s policy decision-making processes: “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,” the letter says.

While the unemployment rate for whites is near 4 percent, the unemployment rate for African-Americans currently stands at 9 percent. The vaunted recovery has never fully reached Black and Latino communities, where stagnant wage growth and involuntary part-time work is widespread. The Congressional letter calls on the Fed to remedy this reality: “By fostering genuine full employment, the Federal Reserve can help combat discrimination and dramatically reduce the disproportionate unemployment faced by minority populations.”

Some Fed officials want to intentionally slow down the economy in June by raising interest rates; the Congressional letter urges Chair Yellen 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.”

The letter also calls for a more transparent process in appointing Fed leaders, pointing to the recent re-appointments of all 12 regional presidents to new five-year terms in February.

The full text of the letter can be found here and below.

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.

Sincerely,

Members of Congress

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www.whatrecovery.org

Fed Up is a coalition of community organizations and labor unions across the country calling on the Federal Reserve to reform its governance and adopt policies that build a strong economy for the American public. The Fed can keep interest rates low, give the economy a fair chance to recover, and prioritize genuine full employment and rising wages for all communities.

www.populardemocracy.org

The Center for Popular Democracy promotes equity, opportunity, and a dynamic democracy in partnership with innovative base-building organizations, organizing networks and alliances, and progressive unions across the country. CPD builds the strength and capacity of democratic organizations to envision and advance a pro-worker, pro-immigrant, racial justice agenda.

Press Contact:

Asya Pikovsky, apikovsky@populardemocracy.org, 207-522-2442