Why Diversity Matters at the Federal Reserve
There’s no question that race and gender matter in determining people’s economic fortunes. African Americans’ unemployment rate is typically twice as high as that of whites. The racial wealth gap...
There’s no question that race and gender matter in determining people’s economic fortunes. African Americans’ unemployment rate is typically twice as high as that of whites. The racial wealth gap has widened since the financial crisis, when African Americans and Hispanics—who had a disproportionate share of their wealth tied up in their homes—disproportionately suffered from subprime loans and foreclosures. The Federal Reserve’s Survey of Consumer Finances finds that the median wealth of a white family in 2013, the last year studied, was $134,008. For Hispanics, it was just $13,900. For African-Americans, $11,184. And as everyone knows, or should, women still make 79 cents for every dollar men make.
These deficiencies are more likely to be ignored when our most important economic policymakers don’t reflect the faces of all Americans. Yesterday, 127 Democratic members of Congress wrote to Federal Reserve chair Janet Yellen about the lack of diversity at the central bank. “The leadership across the Federal Reserve System remains overwhelmingly and disproportionately white and male,” the letter notes. Led by Senators Bernie Sanders and Elizabeth Warren, this high-level challenge also castigates the Fed for being dominated by former and current executives of financial institutions and large corporations, rather than people with backgrounds in academia, labor, or consumer organizations.
The voices of those left behind most egregiously in the economic recovery are simply not present in Fed deliberations.
Momentum to fix the Fed’s diversity problem grew on Thursday when Hillary Clinton endorsed the viewpoints expressed in the letter. Her spokesperson Jesse Ferguson told The Washington Post, “Secretary Clinton believes that the Fed needs to be more representative of America as a whole and that commonsense reforms—like getting bankers off the boards of regional Federal Reserve banks—are long overdue.”
The Fed’s lack of diversity might actually violate the law. Under the Federal Reserve Reform Act of 1977, regional Federal Reserve bank directors are required to “represent the public, without discrimination on the basis of race, creed, color, sex, or national origin, and with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers.” The original Federal Reserve Act only mandated representation from agriculture, commerce, and industry.
It’s unclear what enforcement of that 1977 requirement would look like. But clearly the Fed isn’t living up to it. The members of Congress rely on a February report from the Center for Popular Democracy, organizers of the “Fed Up” coalition, which has pressured the central bank to adopt pro-worker policies. According to their figures, 83 percent of Federal Reserve board members are white, and 72 percent are male. Among the twelve regional Fed bank presidents, only Neel Kashkari of the Minneapolis Fed is non-white, and only Esther George (Kansas City) and Loretta Mester (Cleveland) are female. And among voting members of the Federal Open Market Committee (FOMC), which makes monetary policy decisions, it’s even worse: All ten currently serving members are white.
The lack of occupational diversity is also pretty stark. The Center for Popular Democracy studied the regional feds’ boards of directors, finding that 39 percent represent financial institutions. The Fed’s role as a key supervisor of major banks makes this highly suspect—especially considering there is no mandate for financial interests to be represented on the Fed board.
Another 29 percent of the Fed regional directors represent commerce and industry. Only 11 percent come from community, labor, consumer, or academic organizations. Even representation from the service sector, which has an overly non-white workforce and has expanded in recent years, has shrunk as a percentage of Fed bank-board members relative to 2010, the last time the boards’ makeup was studied.
It’s unusual for members of Congress to take such a public stand on the Federal Reserve, given their mindfulness of central bank independence. But they are recognizing that the lack of diversity has an important effect on economic policy. A more diverse Fed might pay more attention to how far communities of color are from full employment when deciding whether or not to raise interest rates, which they are now deliberating. A more diverse Fed might not be as consumed with the concerns of finance and industry, and their desire to keep inflation and wages low. It might consider how banks have traditionally preyed on communities of color, and target its supervision activities to reflect that.
The voices of those left behind most egregiously in the recovery are simply not present in Fed deliberations. The members of Congress cited a recent blog post by former Minneapolis Fed president Narayana Kocherlakota, who said that “there is one key source of economic difference in American life that is likely underemphasized in FOMC deliberations: race.” Kocherlakota searched transcripts of FOMC meetings from 2010 (the most recent ones released). That entire year, African American unemployment stood at 15.5 percent or above. But, writes Kocherlakota, “Based on that search, my conclusion is that there was no reference in the meetings to labor market conditions among African Americans.”
Traditionally, public pressure on the central bank has come from the right, from the likes of Ron Paul’s “End the Fed” movement. Progressives were largely absent from the conversation, despite the Fed’s central economic role. No more: Thursday’s letter to Yellen is the biggest success yet for the Fed Up campaign, launched two years ago to amplify the voices of communities that didn’t benefit from the recovery. The campaign has brought together labor and community groups to demand that the Fed take its mandate to maximize employment seriously—taking into account all communities, not just affluent ones. And now Fed Up’s views have become dominant in the Democratic Party.
In addition to the hefty names of Sanders and Warren, co-signers include 116 House Democrats, more than half of the caucus, as well as the ranking members of the Financial Services Committee (Maxine Waters) and the Monetary Policy Subcommittee (Gwen Moore), the committees with oversight of the Fed. And Clinton’s endorsement of Fed Up’s sentiment puts most of the ideological spectrum of the party on the side of reform.
But what does reform look like? The Center for Popular Democracy’s February report recommends that each regional board contain at least one member from a labor group, a community organization, academia, and a community bank or credit union. A separate reform proposal from former Yellen advisor Andrew Levin includes a number of ideas, including banning anyone affiliated with a financial institution from serving as a Fed director.
These ideas can be congressionally mandated. That will take time, of course, but the movement has begun to get Democrats off the sidelines to pressure the Fed. When Yellen testified before the House and Senate in February, giving her semi-annual Monetary Policy Report, she received questions about the lack of diversity from 15 different members of Congress. Yellen expressed concern that, among other things, no African American has ever led a regional Federal Reserve bank in U.S. history.
The fact that political pressure can make a difference was again signified by the quick response of a Fed spokesman to Thursday’s letter. The Fed statement said the central bank has “focused considerable attention in recent years on recruiting directors with diverse backgrounds and experience.” Those aspirations have not yet translated into results, however, even after the Fed established an internal diversity office in 2011.
It’s hard for the traditionally cloistered Fed to ignore concerns when they come from high-level Democrats. And just having ordinary workers in the public debate already diversifies the Fed, in a sense. No longer can they simply be responsive to Wall Street without further discussion.
BY DAVID DAYEN
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Why markets ignore Trump news
ALSO TODAY: FED UP IN WYOMING — Per release: “On the eve of the Federal Reserve’s annual economic symposium in Jackson Hole, researchers, scholars, and workers will join Fed Up for a panel...
ALSO TODAY: FED UP IN WYOMING — Per release: “On the eve of the Federal Reserve’s annual economic symposium in Jackson Hole, researchers, scholars, and workers will join Fed Up for a panel discussion that will set the tone for this year’s theme: “Changing Market Structure and Implications for Monetary Policy.” Thursday, August 23 - 4:00 pm MDT. “Free Speech Area” directly in front of the Jackson Lake Lodge.
Read the full article here.
New Orleans experience a warning to Texas
Behind Frenemy Lines - May 10, 2014, by Jason Stanford - This is a typical day for Greg Abbott’s gubernatorial bid: He goes into the office, screws up his own campaign and goes home. If it weren’t...
Behind Frenemy Lines - May 10, 2014, by Jason Stanford - This is a typical day for Greg Abbott’s gubernatorial bid: He goes into the office, screws up his own campaign and goes home. If it weren’t for his mistakes—Ted Nugent, thanking a supporter who called Wendy Davis “retard Barbie”, calling South Texas a “Third-World Country”, and his bungled opposition to equal pay come to mind—Abbott would seem to have no campaign at all. But it’s when you separate the wheat from the gaffe on education that Abbott’s campaign looks like a disaster waiting to happen.
The negative coverage of Abbott’s education plan—and boy howdy has there been a lot—is focused on Abbott’s mistakes. His education plan cites Charles Murray, whose retrograde views on race and gender got him called a “White Nationalist” by the Southern Poverty Law Center. On page 20, his plan calls for “standardized tests” in pre-K. As a dodge, his campaign spokesmanclaimed that was in the plan “for informational purposes only.” And then he cancels campaign events at public schools when the Davis campaign points out that the schools are suing him over funding cuts.
But behind this façade of denials, backpedaling, and obliviousness sits the luckiest man in American politics, because almost no one has bothered to discuss his idea to create “takeover districts” for low-performing schools. He has reportedly modeled his plan on the privatization reforms in New Orleans.
That last bit should scare you. Education reformers—that is, those who think private charters would do better than public schools at educating poor children—call the Recovery School District in New Orleans a success. If the RSD is a success, I’m the third baseman for the Baltimore Orioles. No matter how much I wish that to be true, the facts say otherwise. Here’s why:
No one argues that schools in New Orleans were turning out Harvard scholars by the boatload, so the legislature created the RSD, a takeover district as Abbott has conceived. Davis also supports recovery districts, but Abbott likes the New Orleans model in which “failing” schools would be run by private charters that promised to get the schools shipshape and back into the public school system within five years.
Before taking a look at the results, we must first figure out what “failure” means, because they keep moving that target. RSD used to takeover any school that failed to get a passing score of 60 on the state performance index. After Katrina, the legislature changed that to allow RSD to scoop up any school that fell short of the state’s 87.4 average. The New Orleans private charter district took over 94 schools, 26 of which met the old passing standard. The state redefined failure to mean below average so more schools could get privatized.
Almost a decade later, the takeover district in New Orleans has failed to turn around even one school, so “improvement” became the new goal. Not one school has received an “A” or even a “B” grade. In fact, RSD stopped disclosing the grades their schools received, preferring to publicize percentages of improvement without disclosing the underlying data or that they were cherry-picking the data every year, making it impossible to honestly chart progress. By their original standards, though, all the RSD schools are still failing.
Remember, Louisiana was throwing millions of tax dollars at what were essentially startup small businesses. Fraud and bankruptcy are commonplace, and if you think that’s confined to New Orleans, think again.
Integrity in Education and the Center for Popular Democracy looked at 15 states that have charter schools, one of which was Texas and found “rampant fraud, waste and abuse,” according to a report released last week. The two groups found numerous cases of embezzlement, misuse of tax dollars, child endangerment, bilking taxpayers for services not rendered, inflated enrollment numbers, and general mismanagement. Private charters are running schools like a business. Unfortunately, that business is Wall Street.
It’s never the schools in the wealthy neighborhoods that get taken over. On average, poor children score worse than their wealthier peers. We have always known that, but we cannot get poor children to achieve in school simply by insisting they act like wealthy children.
Now Abbott is using the false dogma of education reform as cover to give up on public schools. Giving up on public schools will not fix public schools, but if Abbott becomes governor, he’ll go into the office every morning, screw up public schools, and go home.
Don’t say you weren’t warned.
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Chris Hemsworth suits up on the Midtown set of Marvel’s “Avengers”

Chris Hemsworth suits up on the Midtown set of Marvel’s “Avengers”
Proceeds benefit the Hurricane Maria Community Relief & Recovery Fund at the Center for Popular Democracy.“I want those audience members to know this is not just doing a star-studded event...
Proceeds benefit the Hurricane Maria Community Relief & Recovery Fund at the Center for Popular Democracy.“I want those audience members to know this is not just doing a star-studded event. This is coming together to do something that matters,” Leon said. “As artists we’re always looking in the mirror. It’s incumbent upon us to make our world the way we want to make it.”
Read the full article here.
Low world inflation dogs central bankers, even as economies grow

Low world inflation dogs central bankers, even as economies grow
Jackson Hole (Wyoming): The world’s top central bankers gather in Jackson Hole, their confidence bolstered by a sustained return to economic growth that may eventually allow the European Central...
Jackson Hole (Wyoming): The world’s top central bankers gather in Jackson Hole, their confidence bolstered by a sustained return to economic growth that may eventually allow the European Central Bank (ECB) and the Bank of Japan to follow the Federal Reserve in winding down their crisis-era policies.
Yet in one key area, none of the world’s central banks has found the answer. Inflation remains well below their two percent targets, stoking a debate about whether they are missing signals of a less than healthy economy and the need for a slower path of “rate normalisation”, or that they simply don’t understand how inflation works in a globalised world.
Read the full article here.
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