NEW YORK, NY — Despite having committed to change, Federal Reserve senior leadership remains overwhelmingly white and shows only slow and uneven signs of any progress of becoming more diverse, a new report from the Center for Popular Democracy’s Fed Up campaign shows. While leaders within the Federal Reserve system have committed to increasing diversity and even launched a conference series about racism and the economy, the report details that little change has actually taken place within the system itself to shift its demographics. 

The report, titled Unrepresentative and Unaccountable: 2021 Analysis of Diversity in Federal Reserve Leadership shows that the system’s senior leadership — Fed Governors and Presidents — are 100 percent white and 83 percent white respectively. Among the regional Fed bank Boards of Directors, which play a key role because they select the bank president, 66 percent are white and 56 percent are male, representing another missed opportunity to improve diversity.

The report presents original data that reveals a significant problem with the selection process for the Regional Boards of Directors. Data shows that private banks are taking advantage of a loophole in the rules to name Directors that undermine diversity goals and favor the banking and business sectors. This undermines the Fed’s obligation to understand and represent the interests of the broad public. 

“Diversifying the Fed’s leadership isn’t an academic issue” said report co-author Benjamin Dulchin, Director of Fed Up Campaign at Center for Popular Democracy. “The Fed is the most powerful economic policy institution in the country, but it’s also the most insulated from the public that it is supposed to represent. If the leadership doesn’t understand the day-to-day experience  of the public, they won’t make the right policy decisions. At the core of their mission, the Fed is constantly balancing the interests of Wall Street with the interests of Main Street. But if the leadership walks and talks like Wall Street, they’ll get it wrong. Fed policy since 1979 shows that pretty clearly.” 

The report’s findings include: 

• There is a shocking lack of diversity of the Fed’s other senior leadership. In 2021, 83 percent of the regional bank presidents are white and 75 percent are male. The Board of Governors is even less representative of the public: In 2021, 100 percent of the governors are white and 67 percent are male. 

• The regional Fed bank Boards of Directors — which have the key power of appointing the bank president — have a significant problem. In 2021, among the 105 current Fed regional board directors, 75 percent come from the banking or business sectors, 66 percent are white, and 56 percent are male. Women of color are vastly underrepresented and only make up 14 percent of all directors. 

• Original CPD data shows that, of those directors from the business sector, 76 percent represent a big business and only 24 percent represent a small business. Similarly, a staggering nearly one in ten Fed board directors are currently CEOs of Fortune 500 companies, despite Fortune 500 CEOs making up only 0.0003 percent of the US labor force.

• The report concludes that private banks are taking advantage of a loophole in the rules to dominate the regional Fed bank boards. The private banks name the class of directors that represent the private banks. But inexplicably, the private banks are also allowed to name one class of directors that is supposed to represent the public. 

• The report shows that the private bank class of directors are 100 percent from the banking sector, 92 percent white and 69 percent male. And the public class of directors that are named by the private banks, nearly 70 percent came from the financial and business sectors. 

• This problem has significant policy implications because the Federal Reserve system is required by statute to understand and represent the interests of the broad public, but if its leadership is overwhelmingly white and from a banking or big-business background, they will fail in this responsibility.

• The Federal Reserve has made some commendable gains in diversifying a third class of directors who represent the public and are appointed by the governors. 

The report includes a clear call to action for elected representatives to ensure that the Federal Reserve leadership is more closely aligned with the economic interests of communities of color and working families, including Congress considering new legislation to increase transparency and accountability, President Biden committing to nominate candidates for Board of Governor seats who increase racial and gender diversity, and the Federal Reserve itself implementing an entirely new selection process for regional bank presidents and members. 

“The boards of directors of the local Fed banks don’t look like the communities they are supposed to understand and represent,” said Terrence James, Outreach and Social Media Coordinator at SPACES in Action. “That’s unacceptable. Diversity is essential at all levels of the Fed’s leadership.”

“Our country is still scrambling to recover from the crisis of the COVID-19 pandemic and the future of our economy remains uncertain,” said coauthor Maggie Corser, Senior Research Analyst at the Center for Popular Democracy. “The only way for us to build back even stronger is with policy makers who will prioritize the needs of working families. To do so, the decision-makers at the Fed need to reflect the diverse public they are supposed to represent.” 

Since 2016, the Center for Popular Democracy’s Fed Up campaign has published comprehensive data on diversity among the Federal Reserve’s leadership. These diversity data have shown a persistent lack of gender, racial and sectoral diversity among the presidents and boards of directors at the twelve Federal Reserve Regional Banks. See here for the full report [LINK].

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Fed Up is a campaign for full employment, rising wages, and a more accountable Federal Reserve, 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 Center for Popular Democracy (CPD) works to create equity, opportunity and a dynamic democracy in partnership with high-impact base-building organizations, organizing alliances, and progressive unions. CPD strengthens our collective capacity to envision and win an innovative pro- worker, pro-immigrant, racial and economic justice agenda.