With white male bankers having dominated the U.S. central banking system, the Federal Reserve in 2020 vowed to make the staffing in its system reflect America. Today, the Federal Reserve has boosted the diversity on the boards of its 12 regional Fed banks.
The Federal Reserve, which is the central banking system of the United States, performs three primary functions: maintaining an effective, reliable payment system; supervising and regulating bank operations; and establishing monetary policies.
The Federal Reserve is composed of 12 regional Federal Reserve Banks, which have 24 branches responsible for a specific geographic area.
On Dec. 4, 2021, the Federal Reserve made its annual leadership appointments, increasing the number of Blacks in top-spot roles.
Of the 24 people named to chair and vice-chair posts at the 12 regional banks for the coming year, 13 are people who identify as Black, Hispanic or otherwise non-white, according to Reuters. In 2021, the group included 13 women but just 10 people of color.
“In recent years, the Federal Reserve System has worked to increase the overall diversity of the Reserve Bank and branch boards of directors and continues to build on those efforts,” the Fed said in a statement.
In June 2020, during a press conference at the Federal Open Market Committee (a committee within the Federal Reserve System), Fed chair Jay Powell addressed the problems of racism and the opportunities for diversity. “I speak for my colleagues throughout the Federal Reserve System when I say that there is no place at the Federal Reserve for racism,” he said. “These principles [of non-discrimination] guide us in all we do, from monetary policy, to our focus on diversity and inclusion in our workplace, and to our work to ensure fair access to credit across the country.”
While Fed bank boards do not set interest rates or write monetary policy, board directors share their opinions of the economy with policymakers, indirectly shaping policy — and pick bank presidents.
“There is loads of research that shows the quality of decision-making is better among groups that are diverse in their composition and their experiences than homogeneous groups,” Fed Governor Lael Brainard, a member of the Board of Governors of the Federal Reserve System, told Reuters in March.
The Fed finally seems to be addressing its longstanding problem with diversity. In the entire system’s history, there have only been three Black members of the Fed’s Board of Governors, only one Black Federal Reserve Bank president, and only three nonwhite Federal Reserve Bank presidents, according to an April 2021 Brookings Institute report entitled “Diversity within the Federal Reserve System.”
There is also a sense that these principals are overwhelmingly promoted from within, creating a risk for groupthink and intellectual homogeneity.