Reuters
Reports that San Francisco Fed President John Williams has been selected to take over the powerful slot as head of the New York regional bank has been met by anger from the left wing.
The Wall Street Journal reported Sunday that the New York Fed board had recommended Williams for the job, citing people familiar with the matter. A final decision could be announced next month.
The New York Fed president is first-among-equals of the Fed banks. First, the New York Fed president always has a vote on interest rates while the other presidents rotate. And the New York Fed is the central bank’s operational arm on Wall Street, buying and selling securities.
Top House Democrats had made the New York Fed’s search a litmus test for how serious the central bank was about promises to build a more diverse leadership team. Only one of the Fed’s dozen regional banks is led by an African American.
Williams, 55, is a former Fed staffer who worked his way up the ladder to become the director of research at the San Francisco Fed under then-president Janet Yellen. He replaced Yellen as president of the San Francisco Fed in 2011 when Yellen moved to Washington to join the board of governors.
“The search for the next New York Fed president began with commitments to diversity and gestures toward public engagement and has ended with the appointment of Williams, a white male,” the Fed Up Coalition said.
“The public clearly articulated what we wanted in a New York Fed president, and we were ignored,” the activist group said.
Krishna Guha, vice chairman of Evercore ISI, and a former New York Fed official, said the bank’s board of directors has “chosen to prioritize monetary policy expertise over first-hand experience of financial markets and diversity considerations pushed by some.”
Critics also charged that Williams should be disqualified because the San Francisco Fed failed to properly oversee scandal-ridden Wells Fargo WFC, +2.57% , which is headquartered in San Francisco.
“After being AWOL and failing to stop Wells Fargo’s decade-long illegal conduct, the president of the San Francisco Fed should not be promoted to president of the most important regional office in the entire Federal Reserve System,” said Dennis Kelleher, president of Better Markets, in a statement.
“That would reward failure and send the wrong message to the biggest banks in the country that the Fed really does not take bank supervision seriously or understand its mandate to protect bank customers from illegal and predatory conduct,” he added.
Wells Fargo opened millions of unauthorized customer accounts and charged hundreds of thousands of borrowers for unneeded guaranteed auto protection or collateral protection insurance for their automobiles. As a result, the Fed last month said the bank was not allowed to grow until adequate reform steps are taken.
Diane Swonk, chief economist at Grant Thornton, said it was unfair to criticize Williams’ oversight of Wells Fargo.
“It is unfair to judge him poorly because of what Wells Fargo did. That was an internal incentive scheme that had to be revealed. You can only go so far in regulation. It is never a perfect balance,” Swonk said.
Later Monday, Sen. Elizabeth Warren, a Democrat from Massachusetts, noting the “indequate” supervision of Wells Fargo, said Williams should testify before the Senate Banking Committee before being approved as next New York Fed president, according to the Wall Street Journal.
Williams’ appointment to the New York Fed job does not need Congressional approval. The New York Fed’s board makes the decision subject to review by the Fed board of governors in Washington.