The Federal Reserve’s commitment to diversity and inclusion is clear — on paper.
The lack of African Americans in crucial positions has prompted a coalition of organizations to push President Biden to integrate the all-White Federal Reserve Board with Black members.
In a letter to Biden on Monday, more than a dozen groups urged the president to “make history” by appointing the first Black Fed chairperson and the first Black woman to its Board of Governors. Biden should “seize this opportunity,” the letter added, “to begin to counteract the longstanding absence of Black leadership at the central bank of the United States.”
During the Fed’s nearly 108-year history, only three African Americans have been appointed to the Federal Reserve Board of Governors. The diversity dearth also is reflected in influential positions not filled by presidential appointments. In the history of the 12 Fed-affiliated regional reserve banks, only one Black person, Raphael Bostic in Atlanta, has been a regional president and CEO. The New York Times reported in February that only 0.5 percent of the Fed’s 417 economists were Black. A doctorate is required for the job.
Questioned about diversity at a House hearing in September, Federal Reserve Chair Jerome H. Powell said that “it’s a very high-profile focus for us.”
A Federal Reserve spokesperson outlined several steps the agency has taken to boost diversity, including working with students in high school through graduate school, collaborating with Howard University on advanced research classes and participating in recruitment events at Black and Hispanic universities. Next week the Fed, along with the Bank of Canada, Bank of England and European Central Bank, will hold a virtual conference on issues facing underrepresented groups in the nations’ central banks and economics and finance sectors.
“It is time to put professionals with the first-hand lived and professional experience of Black Americans at the leadership table of the Federal Reserve to steer policy, practices, and regulation that will benefit the entire economy — particularly the most vulnerable segments, including Black people,” said the letter signed by 13 organization leaders, including Spencer Overton, president of the Joint Center for Political and Economic Studies, and David G. Clunie, executive director of the Black Economic Alliance.
Benefiting the entire economy is a key point.
“Longstanding racial and ethnic disparities in the United States have hurt not only the people who experience the disparities but have hurt all Americans by depressing U.S. economic output by trillions of dollars over the past 30 years,” the Brookings Institution think tank reported in September.
The four authors, including the Federal Reserve Bank of San Francisco’s president and a vice president, said if the U.S. economic pie were more equitable, it would have been $22.9 trillion larger over the 30-year period ended in 2019. We all would be richer and wealthier, not just Black folks.
Similarly, a 2020 report by Citi, a major financial institution, says “if four key racial gaps for Blacks — wages, education, housing, and investment — were closed 20 years ago, $16 trillion could have been added to the U.S. economy. And if the gaps are closed today, $5 trillion can be added to U.S. GDP over the next five years.”
Systemic racism is very expensive.
Powell recognized this two years ago when he told a news conference “there is no place at the Federal Reserve for racism.”
Its workplace diversity statistics call for a second opinion on that. For all its worldly influence, the Federal Reserve System is a parochial place.
A different Brookings report from April says among the regional reserve bank directors, who are key in the choice of regional presidents, there is “a staggering homogeneity. … They are overwhelmingly white, overwhelmingly male, and overwhelmingly drawn from the business communities within their districts, with little participation from minorities, women, or from areas of the economy — labor, nonprofits, the academy — with important contributions to make to Fed governance.”
Members of the Fed’s Board of Governors and regional presidents, the report said, “are overwhelmingly promoted from within, creating a risk for groupthink and intellectual homogeneity.”
Clunie, who was a White House and Treasury Department official during the Obama administration, praised Biden for his “unprecedented focus on racial equity. … We’ve never seen this kind of focus from any presidential administration.”
But he said he believes the Fed and other financial regulatory agencies have been overlooked in that effort. The White House did not reply to a request for comment.
There is a “huge need,” Clunie said in an interview, to examine the Fed’s culture and how it hires and promotes. Too much focus on hiring from within or from certain schools tends to leave out Black candidates.
“If we’re not in … the networks of people who have already been there,” he said, “then it only follows logic that we will not be in the pipeline of people who are coming in for the future.”
The Fed reported in March that “the number of minority PhD economist hires increased from 10 in 2019 to 14 in 2020.” Beware, the word “minority” does not always tell the whole story. “Of the 14 minority economists hired,” the report to Congress added, “7 were Asian American and 7 were Hispanic.”
None were Black.