Read more about how the Federal Reserve has taken important steps to achieve racial diversity in its most senior policy making ranks. More recently, actions taken by former President Donald Trump have presented serious challenges to these advancements. This is a departure from the Federal Reserve’s storied history of overwhelmingly white male leadership. Last year, it made a huge step forward with its most diverse board ever with three members of color. Adriana Kugler—with barely a whimper—recently resigned, and before her, Lisa Cook was given the door. Unfortunately, this progress is now under threat.
The Federal Reserve’s board of governors has long been a bastion of homogeneity. For more than a hundred years, it has been largely made up of white men. Perhaps most strikingly, it was not until the 1970s that the first nonwhite directors were appointed. As recently as the 2010s, fewer than 10% of the total directorships were held by nonwhite directors. This lack of diversity has fueled a growing and justifiable skepticism about the efficacy of the Federal Reserve’s decision-making processes.
All of that changed last year. President Joe Biden appointed Lisa Cook, making her the first Black woman on the Federal Reserve’s Board of Governors, and Adriana Kugler, who became the first Hispanic member. Appointing them was a clear sign that the institution was committed to diversifying the leadership and perspectives in the institution. Cook’s research on racial disparities and historical injustices directly influences how economic policies are crafted to address issues like Black unemployment.
“These key economic policymakers are among the most influential in the entire system’s history.” – Brookings Institution study
The ramifications of these changes stretch further than just the makeup of the board. What’s changed The Federal Reserve has begun to emphasize demographic considerations in policy. This change in dynamic arrives just as employment rates among Black Americans have skyrocketed in recent months. Casting a wider net for perspectives in economic policymaking This call for diverse, independent, and interdisciplinary perspectives has been echoed by other experts.
Sameera Fazili stated, “To have better decision-making and better understandings of the economy, you need to have governors at the Fed with a broad range of experiences.” This feeling further illustrates the necessity of having diversity to create smart, effective economic strategies that benefit everyone across all communities.
Additionally, Jared Bernstein underscored Cook’s rare qualifications for her role. He remarked, “What I think Lisa Cook brings to the Federal Reserve… is (her) deep understanding of historical discrimination and its destructive impact on the economy.” Bernstein made clear that Cook’s ideas were absolutely essential for working to right the wrongs of entrepreneurship and innovation in marginalized communities.
Concerns go beyond the substance to the overall attitude at the Federal Reserve. Saqib Bhatti pointed to a troubling stat last month during the effort to push Cook’s nomination. Yet at that time, only two of 417 staff positions were held by Black folks. Given this stark disparity, one has to wonder whether or not the institution truly values inclusivity.
“When we were making the case for Lisa Cook’s nomination, we found that only two of 417 Federal Reserve staff positions at the time were Black; 318 of them were White. That’s a really big problem.” – Saqib Bhatti
The trajectory toward greater diversity inside of the Federal Reserve hasn’t escaped the watchful eye of critics. Former Senator Pat Toomey didn’t approve – he called Cook’s work “extreme left-wing political advocacy.” This is an important note given the current discussions around diversity in government and policy-making.
Having Kugler resign and Cook fired present huge challenges. Unfortunately, these changes undermine the hard fought progress toward a more inclusive leadership structure at the Federal Reserve. Those recent moves now threaten the institution’s attempts to diversify and better represent its diverse constituency. In turn, this begs the question of whether Infrastructure’s equity provisions truly go far enough.
“Diversity at the Fed is not just about better data interpretation, but also about increasing the legitimacy of the institution and the trust it has from the American public.” – Sameera Fazili