House Democrats are leaning on the Federal Reserve to keep Goldman Sachs and other banks from placing one of their bankers in the president’s office at the Federal Reserve Bank of Richmond.
That spot opened up this month after Jeffrey Lacker admitted his role in leaking information about the central bank’s interest rate decisions, and quickly resigned.
Maxine Waters, the top Democrat on the House Financial Services Committee, led a group of lawmakers Tuesday in telling the Richmond Fed and Federal Reserve chairwoman Janet Yellen to seek diversity in choosing Lacker’s replacement.
The Democrats also noted the uncomfortable fact that one quarter of current regional Fed bank presidents are alumni of Goldman Sachs. Fed bank presidents oversee banks in their districts and participate in the Fed’s monetary policy meetings.
While Yellen has said diversity is important in choosing Fed members, the Democrats said Tuesday that they are not satisfied with how that has been carried out. “If presidents whose interests align with that of the public are to be selected, more intentional efforts must be undertaken,” they told Yellen.
The decision on Lacker’s replacement will be made by the directors of the Richmond bank, but their selection will be subject to approval by the Fed’s Board of Governors in Washington.
Across the 12 Fed regional banks, 39 percent of directors are from financial industry backgrounds, and 42 percent are from business, according to the Democrats. Just 4 percent have labor backgrounds.
One key consideration for labor is the Fed’s interest rate decisionmaking. Labor-backed groups, along with many Democrats, favor easier monetary policy, which they say will generate tighter labor markets with lower unemployment and bigger wage gains.
Lacker was known as one of the more “hawkish” members of the Fed, more likely to favor higher interest rates. His background was in academia and the Fed system.
