New York Fed taps Williams for top post, ignoring Democrats on diversity

The New York Federal Reserve announced that San Francisco Fed President John Williams will become its next president and CEO, spurning calls from progressive Democrats for a choice who would bring gender or racial diversity to the role.

Williams, a white Ph.D economist, was approved by the Fed board in Washington on Tuesday. He becomes the second leader of the San Francisco Fed in recent years to ascend to a more prominent role within the central bank; his predecessor, Janet Yellen, went on to become Fed vice chair and then Fed chair.

Outgoing New York Fed President Bill Dudley’s last day will be June 17, and Williams will take over the following day.

“After a thorough process, my fellow search committee members and I felt that John best fulfilled the criteria we’d identified as well as the feedback we’d received through our public outreach efforts,” said Sara Horowitz, who chairs the New York Fed board and led the search committee along with private equity investor Glenn Hutchins, another board member.

Williams also has a close relationship with Fed Chairman Jerome Powell, for whom he will perform an important supporting role. The New York Fed president serves as vice chairman of the Fed’s interest rate-setting committee and oversees most of the country’s biggest banks.

“John is a dedicated public servant, a distinguished thought-leader in monetary policymaking, and a proven executive and public communicator,” Powell said in a statement.

Still, Williams’ selection did nothing to address the issue of diversity, which has dogged the central bank for years, with only four of the 12 reserve bank presidents being either women or people of color. That criticism only intensified after Thomas Barkin, a white man from the private sector, was picked in December to lead the Richmond Fed.

Sen. Sherrod Brown (D-Ohio) said Williams is “a distinguished and respected economist“ but expressed disappointment at the selection of “another Fed insider.”

“Federal Reserve System officials cannot continue to say that diversity is important without showing that they mean it in their selection of individuals to lead the Federal Reserve Banks and other positions,” he said in a statement.

Sen. Elizabeth Warren (D-Mass.) had called for the co-chairs and Williams to appear before the Senate Banking Committee if Williams ended up as the choice. Fed Up co-director Shawn Sebastian said the coalition supports that call. “Today, the Fed concluded another opaque and controversial Reserve Bank presidential selection process by ignoring the demands of the public and choosing another white man whose record on Wall St regulation and full employment raises serious questions,” he said in a tweet.

Yellen, who praised Williams and said she “very much valued his advice and insight“ during the financial crisis, implicitly defended him against progressive groups, which have criticized him for pushing higher interest rates earlier on in the economic recovery.

“John’s groundbreaking research helped establish the intellectual foundation for the Federal Reserve’s determination to support American households and businesses by pushing short-term interest rates very low and adopting non-traditional strategies to lower longer-term interest rates, such as those on mortgages,“ she said in a statement.

The search committee, in the course of looking for the next president, identified 30 candidates who were qualified, according to a timeline released by the Fed, of which roughly half were “diverse candidates,” which they told reporters means women and minorities.

The committee co-chairs said Williams best fulfilled all the requirements they’d laid out as their priorities. They also said Williams had increased the percentage of women and minorities in senior leadership at the San Francisco Fed to 46 percent from 12 percent.

The co-chairs said they graded the semi-finalists on objective metrics and compared them to each other. They also said the search encompassed diversity beyond simply gender and race, including experience.

Horowitz and Hutchins had highlighted diversity as being of high importance in their search, along with expertise in monetary policy, capital markets and crisis management. Williams, who has spent his career at the Fed, doesn’t have direct markets experience but already serves on the central bank’s interest rate-setting committee.

They downplayed Williams’ lack of direct markets experience, citing his experience as Yellen’s right-hand man during the financial crisis as evidence of his deep understanding of markets.

Williams was one of 11 semi-finalists interviewed for the position, six of whom were “diverse candidates,” the timeline says, which was then whittled down to three.

“Throughout the interview process, the search committee continues to receive candidate nominations, most of whom are contacted and vetted by the search firms at the behest of the committee,” it says.

Williams interviewed with the Fed board in Washington on March 20 and then met with the New York Fed board, which voted unanimously on Monday to select him (the three directors with a background in banking are not allowed to participate in the vote).

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