(Bloomberg) -- The Federal Reserve’s internal watchdog is planning to review the role of the central bank’s board in appointing and approving the leaders of the 12 regional reserve banks, several of whom have been embroiled in controversies over the past few years.
The Fed’s inspector general will evaluate “the board’s process for appointing and approving Reserve Bank leaders, including its consideration of diversity and inclusion,” according to a listing of planned projects on its website. The notice doesn’t say when the review will begin or what prompted it.
The Fed presidents have come under congressional criticism for a lack of diversity, with the first Black president, Raphael Bostic of the Atlanta Fed, appointed only in 2017, more than a century after Congress created the regional system.
Over the past three years, seven of the 12 presidents of the central bank’s regional outposts have also stumbled into ethics scandals, butted heads with Congress over transparency, or faced complaints that they strayed beyond their mandate into politically charged issues such as climate change and inequality. Two of them, former Dallas Fed President Robert Kaplan and Boston’s Eric Rosengren, stepped down following revelations of unusual trading during 2020, with Rosengren citing a chronic illness in announcing his early retirement.
The regional chiefs, who oversee a dozen districts across the US, vote on rate decisions that affect millions of Americans, and rotate as voting members of the Fed’s policy committee four at a time each year.
Unlike the seven-member Fed board in Washington, whose members are nominated by the president and confirmed by the Senate, regional presidents are chosen in a mostly secretive process led by their local boards of directors, subject to the approval by the Fed board.
In recent years, the Fed board has taken an active role in some Fed president searches, suggesting candidates for potential jobs in addition to approving or rejecting the choices of local boards. The board also approves Fed bank first vice presidents.
In a search concluded in August, the Kansas City Fed appointed a longtime banker and bank regulator Jeffrey R. Schmid after a search that lasted more than a year. Among the banks, the St. Louis Fed is now engaged in a search for a new president following the resignation of James Bullard to become the dean of Purdue University’s business school.
--With assistance from Craig Torres.
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