U.S. Senator Elizabeth Warren (D-Massachusetts) has shown in the past that she is not afraid to aggressively confront members of her own party on issues that she is passionate about.
This has been especially evident on issues facing the mortgage industry. Warren famously grilled FHFA Director Mel Watt in November 2014 in a Senate Banking Committee hearing on why the Director had not yet instituted a principal reduction program for underwater homeowners. In September 2015, she and Rep. Michael Capuano (D-Massachusetts) led a protest in Washington over HUD’s and FHFA’s sales of delinquent mortgage loans to private investors. Both organizations are led by Democrats.
Now Warren has turned her attention toward the Federal Reserve Board and Chair Janet Yellen. On Thursday, Warren and 10 other U.S. Senators, along with 116 of the 193 Democratic members of the U.S. House of Representatives (led by John Conyers, D-Michigan) wrote a letter to Yellen calling for more diversity in the leadership of the central bank.
After starting off by calling Yellen’s tenure at the Fed “historic” and pointing out some economic gains the country has made since Yellen was appointed as the head of the central bank in February 2014, the lawmakers then addressed what they believe to be a problem in the demographic makeup among the Fed’s leadership.
“A lack of diverse leadership is hurting the Federal Reserve's policy decision-making process.”
U.S. Senator Elizabeth Warren
“However, despite these gains, we remain deeply concerned that the Federal Reserve has not yet fulfilled its statutory and moral obligation to ensure that its leadership reflects the composition of our diverse nation in terms of gender, race and ethnicity, economic background, and occupation, and we call on you to take steps to promptly begin to remedy this issue,” the lawmakers wrote.
The lawmakers cited a law passed by Congress in 1977 requiring the Fed’s leadership to more reflect the country’s diverse makeup without discrimination based on race, creed, color, sex, or national origin. The letter pointed out that nearly four decades later, “the leadership across the Federal Reserve system remains overwhelmingly and disproportionately white and male, while major financial institutions and corporations are overrepresented in senior roles.”
The letter cited a February 2016 study by the Center for Popular Democracy which found that 83 percent of Federal Reserve head office board members are white and nearly three-quarters of all regional bank directorships are held by men.
“When the voices of women, African-Americans, Latinos, Asian Pacific Americans, and representatives of consumers and labor are excluded from key discussions, their interests are too often neglected,” the letter stated. Warren further tweeted on Thursday that “[a] lack of diverse leadership is hurting the Federal Reserve's policy decision-making process.”
In addition to what the lawmakers perceive as racial and gender disparities, they also expressed concern over a “persistent lack of occupational diversity, noting that only 11 percent of the Fed’s regional bank directors come from community, labor, or academic organizations compared to 39 percent that represent financial institutions and 47 percent that represent commerce, industry, and services firms.
In response to the Warren-Conyers letter, Democratic presidential hopeful Hillary Clinton came out on Thursday in favor of reform among the Fed's leadership.
“The Federal Reserve is a vital institution for our economy and the well-being of our middle class, and the American people should have no doubt that the Fed is serving the public interest,” Clinton spokesman Jesse Ferguson said in a statement. “That's why 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.”
A Fed spokesperson responded to the Warren-Conyers letter with the following statement: “The Federal Reserve is committed to fostering diversity—by race, ethnicity, gender, and professional background—within its leadership ranks.
“To bring a variety of perspectives to Federal Reserve Bank and Branch boards, we have focused considerable attention in recent years on recruiting directors with diverse backgrounds and experiences. By law, we consider the interests of agriculture, commerce, industry, services, labor, and consumers. We also are aiming to increase ethnic and gender diversity.
“Minority representation on Reserve Bank and Branch boards has increased from 16 percent in 2010 to 24 percent in 2016. The proportion of women directors has risen from 23 percent to 30 percent over the same period. Currently, 46 percent of all directors are diverse in terms of race and/or gender (with a director who is both female and a minority counted only one time). We are striving to continue that progress.”
Click here to read the complete letter and see which Senators and members of the House signed the letter.