(Photo: AP/Carolyn Kaster)
Marc Morial, the president of the civil-rights group the National Urban League, met recently with Janet Yellen, the Federal Reserve chair, to urge her to make a concerted effort to increase diversity in the U.S. central banking system. Several members of Federal Reserve's Board of Governors and economists from the league also attended the meeting.
The financial interests of communities of colors often take a backseat to the prerogatives of the big banks and the wealthy. The remedies that came out of the Great Recession were no exception: Restoring the health of the banking sector took precedence over trying to get struggling homeowners, many of them people of color, back on their feet. The National Urban League stressed that having a better mix of voices involved in Federal Reserve policy-making would go a long way to addressing the particular needs of minority communities. The American Prospect's Nathalie Baptiste spoke with Morial about the benefits of a diverse Federal Reserve workforce.
Nathalie Baptiste: Why did the National Urban League and other groups decide to meet with Janet Yellen?
Marc Morial: The Federal Reserve has a mandate to pursue full employment. As a civil-rights organization that focuses on economic issues, we wanted to have a broader discussion to continue to push the Fed on that, and to push it to use its bully pulpit on issues related to income inequality and the racial wealth gap.
We have been systematically meeting with agencies that are covered by the Minority and Women Inclusion provision of the Dodd-Frank Act. Dodd-Frank includes historic diversity provisions, which require a host of economic agencies to develop approaches and plans for diversity. The provisions were included in the Dodd-Frank Act primarily [at the behest of] the black and Latino members who were on the House Financial Services Committee in 2010.
We have an interest in ensuring that those provisions are adhered to. We've met with the Office of the Comptroller of the Currency, too, and we will be meeting with other agencies that are covered by those provisions to find out where they are [in the process of diversifying], and continue to push and prod them.
Why does the Federal Reserve need to have a diverse workforce?
The Federal Reserve should want to have a diverse workforce and a diverse set of economists who bring their life experiences and their perspectives on economic policy to the table. The other reason for diversity is sheer fairness.
The Fed has never had a black, brown, or Asian regional president in its history.
If we're an equal-opportunity country, then in the 21st century for the Federal Reserve to not have a very diverse professional staff is not acceptable.
How can diversifying the Fed help close the racial wealth gap?
One wouldn't want to say that by simply diversifying, we can close the wealth gap, but I do think that including diverse voices around discussions of policy means that something as critical as the racial wealth gap doesn't become just a footnote, but becomes central to the Federal Reserve's policy-making process.
The Fed used the full extent of its creative powers during the recession to stimulate the economy. We urge the Fed to use its full power when it comes to confronting income inequality and the racial wealth gap.
The Federal Reserve was toying with raising interest rates last year. What effect would raising rates have on the economy?
The raising of interest rates at this time is not warranted. The negative side outweighs any benefits one might be able to find. The inflation rate is low, the unemployment rate has come down some, but we don't have a certainty that growth is going to be sustained. The Fed only raises interest rates to combat inflation. I don't think you can find any one, on any corner in America, who feels that the economy is growing too fast. The people who want interest rate raises are people for whom increases might help their investment portfolios.
Yet not everyone sees the value in diversifying the Fed and some people even want to get rid of the central bank.
To me, it's just a political attack. They don't even suggest, if the Fed is eliminated, how you would manage this country's money supply, how you'd control the banks. If they want go back to the good old days before the creation of the Federal Reserve, well, that's when you had banking boom-and-bust cycles every 10 to 15 years.
Was there anything the Fed could have done differently after the 2008 financial crisis? What could have happened if there was more diversity on the Board of Governors?
A greater focus on community banks, African American banks, and small-business lending would have helped. One of the misses in the recovery was the absolute resistance we received to the National Urban League's suggestion that there ought to be principal reduction [loan modification for seriously delinquent mortgages] for struggling homeowners. Because of the recession, the value of their homes decreased and their mortgages were more than the value of their homes. We should have resized the mortgages. [The National Urban League] was a proponent of that from the very beginning.
It's only now, nine years later, that the Federal Reserve and other monetary agencies are looking at principal reduction. There should've been a much bigger focus on helping homeowners versus helping big banks. The policy could have been more consumer-centric.
What was the most important takeaway from the meeting with Yellen?
An important step the Fed can take now is working very significantly on diversifying the team of people who serve as Federal Reserve regional presidents. That would be a powerful step. The Fed also has advisory boards; more diversity among those boards would be a step in the right direction as well.
They could make significant process in the next two or three years by modifying the way they recruit: fellowships, internships, making relationships with colleges and historically black colleges and universities and [coming up with] some creative approaches to creating a diverse pipeline.
Yellen was very receptive and there were a number of other members of the Board of Governors there. They were listening and they took the meeting very seriously.
