A year ago, the Federal Reserve, our nation’s most powerful economic policy maker, said that there was nothing it could do about racial disparities. Now, according to the Wall Street Journal, there is "a rising recognition within the Fed that the racial gaps in the economy are becoming more pronounced and that there is a role for monetary policy to play in shrinking those gaps."
That's a major shift in how monetary policy gets made. How did it happen? A grassroots uprising from low-income people of color, the unemployed, and the underemployed pushed issues of racial justice front and center into debates about monetary policy – and they succeeded in changing the conversation at the Federal Reserve.
The Fed Up campaign is a coalition of community-based organizations from across the country, labor unions, policy think tanks, and expert economists who decided to take on the Federal Reserve, long considered immune to outside criticism.
The Great Recession of 2008 brought things to a head. With Congress failing to pass an adequate stimulus in the wake of the crash and authorizing almost nothing since, it’s become clear that the Federal Reserve is the country’s only institution acting to stimulate the economy.
Progressives are concerned about raising wages, getting good jobs for more people, and building the bargaining power of workers to win victories like paid sick days and fair scheduling.
But they didn’t think to target the Federal Reserve, an institution designed to remain as insulated from the public as possible. The Fed system comprises a Board of Governors, whose members are appointed to 14-year terms by the President and approved by the Senate, as well as boards of directors for each of the 12 regional Federal Reserve Banks. These regional boards are overwhelming white and male and draw their membership largely from the corporate and financial sectors, which makes sense as two thirds of them are appointed by commercial banks.
Given the Federal Reserve’s opaque, insular structure designed to keep the influence of regular people at bay, it’s nothing short of remarkable that the Fed Up campaign has altered the conversation as much as it has in two short years.
Since its launch in the summer of 2014 the Fed Up Campaign has released reports on racial disparities in the economy and the unrepresentative composition of the Fed, met with Fed Chair Janet Yellen face to face as well as 11 out of the 12 regional Bank presidents, conducted protests, and lobbied members of Congress to question Yellen on racial disparities during her semi-annual Humphrey Hawkins testimony before Congress.
Under questioning from Congress in February 2016, Janet Yellen insisted to Congress that she could not do anything about racial disparities. Yet, not even four months later, when Janet Yellen testified at the Humphrey Hawkins hearing in June, something was different.
Yellen began her testimony with statistics on racial disparities in income and employment among Blacks and Latin@s. This is something the Fed has never done before. By including data on racial disparities, Yellen signaled that the status of communities of color is relevant to the Fed's decisions on the economy and she said that broad-based inclusion in the recovery is a priority..
Yellen made this historic move on racial justice because of the pressure the Fed Up coalition put both on the Fed and on Congress. In May, Fed Up worked with Congress members to send a letter to Yellen urging better public representation and diversity on the 12 regional Banks' boards of directors, which was ultimately signed by 127 senators and representatives.
Then Fed Up released a slate of candidates from more diverse backgrounds who could be appointed to the leadership of the Federal Reserve Regional and a new report about potential conflicts of interest among current directors, which received coverage in the Wall Street Journal.
The advocacy with Congress worked. After meeting with Fed Up coalition member Common Good Ohio, Sen. Sherrod Brown (D-OH) urged Yellen at her Congressional hearing to appoint people from more diverse backgrounds to the regional Banks. Sen. Robert Menendez (D-NJ) urged Yellen to improve on diversity, citing the fact that 83% of regional board directors are white – a figure from our February report.
And Sen.Elizabeth Warren (D-MA) echoed Fed Up's call for reforming the process for selection regional Bank presidents, calling the process "broken" and saying, "I think Congress should take a hard look at reforming the regional Fed's selection process so that we can all benefit from a Fed leadership that reflects a broader array of both backgrounds and interests."
The next day Rep. Terri Sewell (D-AL) echoed Warren's call, asking Yellen whether she'd considered our recommendation to appoint three Class C directors at each regional Bank from backgrounds in academia, labor groups, and community-based organizations.
We still have a long way to go before one of the most powerful, secretive, least democratically accountable, and thoroughly corporate dominated institutions truly represents the public and serves all of the public -- including low-income people and communities of color.
But Janet Yellen’s most recent Humphrey Hawkins testimony does show that the Federal Reserve is not completely insulated from public opinion, and that regular people standing up and demanding to be heard can push even the Federal Reserve to listen.