Is the Fed board eroding regional Fed banks’ independence?
By Kyle Campbell
The Federal Reserve Board of Governors has a greater say over leadership at the reserve banks than it once did. But whether that benefits the central banking system is an open debate…Karen Petrou, managing partner of Federal Financial Analytics, understands the Board’s involvement in presidential approvals to be largely consistent with its historical approach. The only meaningful change, she said, is the Board’s insistence that it review candidate pools to ensure they are “broad and diverse.”
The Board has outlined its policy around its reserve bank presidential search involvement on a frequently asked questions page on its website. According to archived versions of the site, the page has been live and has highlighted the focus on “broad and diverse” candidate pools since at least December 2014. Because the Fed has taken a stance that fostering diversity, equity and inclusion is important, Petrou said it is incumbent upon the Board — as the oversight entity for the entire system — to weigh in on such issues. “If you are going to have a system wide DEI policy, then the Board really needs to play a role, because none of the individual reserve banks is in a position — other than perhaps informally — to know what the other reserve banks are doing, and you’d end up with 12 white men [as presidents], or you could,” Petrou said. “Only the board has that authority to really have a sense of what each of the banks is up to.”…