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**AUGUST 30, 2021**

Kuttner on TAP

The Federal Reserve: Needed Diversity at a White Male Club

****

I hope readers will indulge my obsession with the issue of the next
Federal Reserve chair, an upcoming Biden decision as momentous as
Supreme Court nominations, given the Fed's immense discretionary
power.

As I've noted in previous posts, Chairman Jay Powell and his lobby
contend that he deserves reappointment, despite being a Trump appointee
and a former private equity mogul, because he's been good on monetary
policy. The counter is that he's been terrible on financial
regulation, economic concentration, and as David Dayen wrote in this
piece
,
also bad on climate.

I've also pointed out that if Powell stays, conservative Republicans
keep a majority of Fed governors. If he goes, that creates a domino
effect leading to more open seats and 4-3 or even 5-2 majorities of
pro-regulation Democrats.

But there is another key dimension that has received almost no coverage.
In an administration that has made unprecedented gains on diversity and
inclusion, the Fed remains an anachronism. Since taking office in late
2017, Powell has done nothing to improve its dismal record.

The two Fed vice chairs appointed by Trump on the recommendation of
Powell and Trump Treasury Secretary Steve Mnuchin are male and pale,
Richard Clarida and Randy Quarles. Likewise Powell's choice for
president of the New York Fed, John C. Williams.

The 12 regional Fed Banks have just one Black president, Raphael Bostic
in Atlanta, who got the job thanks to Powell's predecessor, Janet
Yellen. Four current regional Fed presidents will soon be retiring, and
the next Fed chair will play a key role in recruiting their successors.
According to reporting by

**The New York Times**
,
exactly two of the Fed's more than 400 staff economists are Black.

Here's were the aforementioned domino effect comes in. If Biden
dispatches Powell, the Fed could go from being one of the worst agencies
on race and gender to one of the best.

The leading candidates for the seats that would open up are women or
African American, or both. They include former Fed governor Sarah Bloom
Raskin; Michigan State economist Lisa Cook, who is African American; and
William Spriggs, the chair of Howard University's economics department
and chief economist of the AFL-CIO, also African American.

The one current Democrat and the sole woman on the Fed Board, Lael
Brainard, the leading contender to replace Powell, has an excellent
record on inclusion issues. She has championed the Community
Reinvestment Act, blocking an effort by Trump's comptroller of the
currency to weaken it, and has spoken out on the need for greater
diversity in the economics profession. As chair, she would make greater
diversity throughout the Fed system

a priority.

If nothing else persuades Biden to replace Powell, presumably with
Brainard, the opportunity to align the Fed with Biden's own superb
record on diversity and inclusion should be decisive.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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