If confirmed, the presidential election would change the composition of the white male-dominated Fed governor. In its nearly 109-year history, the board has had only three black members – the last, Roger Ferguson, left in 2006.
That lack of representation has fueled growing frustration among key Democratic constituencies — and prompted Biden to promise in November to bring “new diversity” to the Fed — even as the central bank has begun to focus more on disparities in economic outcomes for the disadvantaged to focus communities.
“Over the past six years, I have urged several Federal Reserve Chairmen to increase leadership and staff diversity,” Rep. Joyce Beatty (D-Ohio), who chairs the Congressional Black Caucus, told POLITICO ahead of the announcements. “While the Fed has made great strides in some areas, we still have work to do when it comes to Fed members [Federal Open Market Committee]who determine the monetary policy of this country.”
Biden’s new Fed would be the most diverse ever, with four women on the seven-member board and the first woman of color with Cook. “This group will bring much-needed expertise, judgment and leadership to the Federal Reserve while bringing an unprecedented diversity of thought and perspective to the Board of Governors,” Biden said in a statement announcing the nominations.
The new members are likely to push for a greater Fed emphasis on issues like climate change financing, diversity in the financial services industry and discrimination in lending, areas that have often been seen as secondary — or, in the case of climate, not even part of the responsibility the central bank.
This will provoke resistance from some Republicans, who have complained that the Fed is overstepping its mission to promote price stability and maximum employment. Raskin and Cook will likely draw the most criticism from GOP lawmakers on the Senate Banking Committee, which will review the nominees.
“Members of the Fed’s Board of Governors should have exceptional qualifications and an accurate appreciation of the Fed’s narrow monetary policy and banking supervision mandates,” Sen. Pat Toomey (R-Pa.), the top Republican on the committee, said in a statement Thursday night . “I will look closely to determine whether Ms. Cook and Mr. Jefferson have the necessary experience, judgment and political views to serve as Fed Governors.”
Toomey, who has previously expressed concerns about Raskin’s nomination, said he feared it would go beyond the Fed’s mandates “to actively involve the central bank in capital allocation.”
The presidential pick could also counterbalance a drive to be more aggressive to combat rising inflation, a possible source of tension on the board and with GOP lawmakers. Many progressives have urged the Fed to keep interest rates low for as long as possible until more Americans can feel the benefits of the recovery.
The unemployment rate among black Americans has historically been double that of white workers, meaning the prospect of curbing economic activity to stave off inflation raises equity issues.
By appointing Raskin, a former Deputy Treasury Secretary, Biden is installing an official who is pushing for tighter oversight of Wall Street. That could appease supporters of financial regulation, who have criticized Powell for relaxing rules on big financial firms and not doing more to fight climate change.
Some black congressmen hoped Cook was Michigan Professor at State University, would be appointed vice chairman of the Fed with Brainard as chairman, according to a person familiar with the matter. Brainard got second place instead, while Powell was renamed for the top job.
now These advocates count on Cook to bring her work on the economic impact of racial discrimination and her experience mentoring other young people of color in the economy as they seek to expand diversity elsewhere at the Fed. She also secured the support of climate groups and other activists.
Jefferson, a former Fed economist, is a professor and administrator at Davidson College in North Carolina. According to his biography, his work focused on the “role of education as a buffer against unemployment, the impact of business cycles on poverty rates and the distribution of income between labor and capital”.
If confirmed, members will have a vote in approving new leaders for the Fed’s regional branches who are not appointed by the President. Proponents see the potential for a cascading effect; With increasing diversity on the Executive Board, the Central Bank’s personal network is also growing.
And the Fed has a lot to do. The Brookings Institution found last year that in any given year during the 2010s, fewer than 10 percent of the board members of each of the 12 regional Fed banks were nonwhite. These directors are key to finding and selecting their bank president, who sits on the Fed’s Interest Rate Committee.
Only two of those 12 presidents — Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari — are black.
Meanwhile, the New York Times reported that only two of the 417 staff economists on the Fed’s board were black, according to central bank data released in January 2021.
Senator Bob Menendez (DN.J.) also lectured Powell at Tuesday’s nomination hearing on the fact that no Latino has ever served in a senior policy role at the Fed.
Powell has committed to building a more diverse workforce at the central bank.
“We’re working to foster an inclusive work environment where employees can feel comfortable at work, and to foster a similarly inclusive culture within the profession,” he said at a Fed-co-hosted diversity and inclusion conference in November. “We’re working to expand our reach by recruiting at historically black colleges and universities and Spanish-speaking institutions, and hosting events to promote career opportunities at the Fed.”
Against this backdrop, the Congressional Black Caucus has asked the government and the Fed for more diverse representation in monetary policy. Beatty and Sen. Raphael Warnock (D-Ga.) are focused on ensuring this is a priority when looking for new executives at the Boston Fed and Dallas Fed.
These searches are at the center of groups like the Fed Up Campaign, which have pushed the Fed to revise regional presidential picks. The Dallas Fed held a town hall meeting this week to solicit input from the public, suggesting some of that pressure is working.
“Why are there still only two presidents of color among the 12 in 2021? It should be a scandal, but it’s certainly not an accident,” said Benjamin Dulchin, director of Fed Up, a coalition of community and labor groups campaigning for central bank policies that benefit workers.
Biden’s new appointments could also have an impact here.
Progressive activists have also stressed the importance of background diversity, saying the Fed should go beyond Wall Street and Ph.D. look out. economists.
“The diversity argument gets so lost in racial symbolism, like we need one of every color, but a lot of what we’ve been pushing for is racial diversity, gender diversity, ideological diversity,” said Vasudha Desikan, political director of Action Center for Race and Economy . “Lisa Cook is rooted in, but also a part of, the Black communities she came from and grew up in.”
laura beach grass–López contributed to this report.