Lindsay and Ann Saphir (NYSE:) Dunsmuir

SAN FRANCISCO, (Reuters) – Seven years ago, white men dominated the board of any of the twelve U.S. Federal Reserve Banks. White men have been in minority for every bank this year for the first ever time.

A Reuters study found that 44% of the 105 directors who make up the 2022 board are women and that 40% are Black, Hispanic or other non-white. Board chairs and vice chairs were https://www.reuters.com/article/usa-fed-diversity-idINKBN2JF1SX for the first time both majority female and majority people of color, and also for the first time included two labor leaders.

With raging inflation, slowing job growth and hardships for many families of lower income, the Fed’s Directors are changing at an important time in the U.S. Economy.

This is a crucial moment for the Fed bank that controls the nation’s monetary policies. A third of Fed banks will be in need of new presidents within the next one year.

Reuters data shows that among the powerful directors who are eligible to select new Fed bank presidents, which in turn sets interest rates for America, a majority of them are women.

Both the Boston Fed and Dallas Fed are looking for replacements to two recently-resigned presidents. They’re both white men. The Dallas Fed held a public town hall on Thursday in order to get feedback from the public.

Next January will see the mandatory retirement age for presidents of Fed Reserve Banks Chicago and Kansas City. They are white men and women. They are likely to start searching in the next few months.

In this context, the Fed’s successes in diversity on the regional boards represent a major milestone. The Fed’s leadership in the past 108 years hasn’t been able to reflect the changing demographics of this country, for which it is the strongest force in the area of economic policymaking.

The gains are the result of a years https://www.reuters.com/article/us-usa-fed-diversity-insight/too-white-too-male-fed-takes-on-diversity-one-bank-board-member-at-a-time-idUSKCN20L1FN-long push https://www.reuters.com/article/us-usa-fed-diversity-analysis-idUKKBN2B1187 by Fed officials to attract more women and minorities to serve on boards in order to better mirror the nation as a whole, build credibility in communities particularly vulnerable in economic downturns, and both promote better decisionmaking on policy and attract more diverse talent to senior Fed roles.

Jerome Powell, Fed Chair and National Community Reinvestment Coalition spokesperson said last May that “I am really proud of the work we have done.” It was a hard work.

It’s still far to go.

Powell leads the Fed Board with five members. There are only two women on this panel. The seven-seat Fed Board has always had three or more female members and three Black members. The nominations of U.S. President Joe Biden this week could change the Fed Board’s face in Washington. However, it is not possible to directly appoint the majority of regional bank presidents (half of which are white and half are male)

These choices fall under the control of regional banks boards with approval from the Fed Board.

Regionally, San Francisco Fed’s and Philadelphia Fed’s boards are least diverse. One-third of each board’s members are women while one-third is minority. Boston, Chicago and Cleveland both have majority-women boards. Chicago is currently conducting a presidential search. Dallas Fed has the largest number of people of colour on its boards.

PATH TO A BETTER POLICY

Fed bank presidents agree that diversity on the Fed banks boards is crucial. Noting that different backgrounds provide valuable insights into the economy, and how their policy impacts the real world, they say having diverse directors at Fed bank boards can be very beneficial.

San Francisco Fed President Mary Daly, who spoke earlier this month at an event hosted by the Central Bank of Ireland said that “we make better policies when we have diverse teams,” echoing research across all industries.

With regard to the Fed in particular, a study published in early January suggested diverse Fed bank boards strongly correlated with increased lending https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4000110 by local banks to lower-income neighborhoods.

And Fed leaders hope that having more diverse boards of directors at the regional Fed banks is a step towards getting a more diverse group of Fed presidents.

It’s not a magic bullet, but it is possible.

The Cleveland Fed, in 1988, was the last Fed bank to get a female director, data https://www.brookings.edu/research/diversity-within-the-federal-reserve-system published by Brookings Institution shows, but the first, in 1982, to hire a woman president and three of the seven women ever to serve as Fed presidents led the Cleveland Fed.

Minneapolis Fed board had the second-lowest number of non-white directors, but it has now hired two out of three non-white bank presidents.

“I do believe that going forward this will be much more important and the (board of directors) will be more cognizant of diversity, but it definitely doesn’t map one-to-one,” said Kaleb Nygaard, senior research associate at the Yale Program on Financial Stability who along with Peter Conti Brown has been studying the Fed bank boards and is among those calling out the Fed for lack of diversity.

“Our central bank needs to be led not just by people from our diverse country but also those with backgrounds that reflect all sectors of the economy,” he stated.