Throughout the Federal Reserve’s 111-year history, its top policymakers have mostly been white men. Now some recent progress diversifying the ranks of the world’s most powerful bank is being undone.
Under pressure from some congressional lawmakers to improve diversity, then-President Joe Biden appointed Adriana Kugler, Lisa Cook and Philip Jefferson — all people of color — to the Fed’s Board of Governors. Kugler was the first Hispanic on the seven-member board, and Cook was the first Black woman.
President Donald Trump earlier this week said he fired Cook, citing allegations of mortgage fraud that haven’t been taken to court. It was the first time a US president has acted to remove a Fed governor. On Thursday, Cook sued to challenge Trump’s removal order, with her attorney saying the mortgage fraud accusation “has never been investigated, much less proven.” She has not been charged with any wrongdoing.
Kugler resigned from her position this month without providing a reason, leaving several months before her term would have expired in January. Trump nominated Stephen Miran, one of his top economic advisers, to fill Kugler’s seat on the board.
Fed policymakers are seen as stewards of the US economy, tasked with making crucial decisions on interest rates in striving for their dual mandate of maximum employment and stable prices. They make these decisions after examining how the economy is working across all of America, including by demographic. For example, minutes from the Fed’s July policy meeting showed that central bankers discussed how Black unemployment, which has risen sharply in recent months, can be “cyclically sensitive.”
Historically, the Fed has had a diversity problem. Last year, the Fed’s board was the most racially diverse it’s ever been, with three people of color on the seven-member board. If only one of those three remains, there could be implications for how the central bank’s policies consider race, in addition to the implications of there being only two Fed governors appointed by a Democratic president.
Race and economics often intersect in the United States, whether it’s where people can buy a home or what job opportunities are available. Cook, in particular, is a former economics professor whose research focused on racial disparities, the history of financial institutions, crises in financial markets and innovation.
The president’s attempted firing of Cook comes as his administration has more broadly tried to dismantle diversity, equity and inclusion, or DEI, efforts across the federal government. Earlier this year, Trump fired Gwynne Wilcox, the first Black woman to serve on National Labor Relations Board, and Gen. Charles Quinton Brown Jr., a Black man who was the chair of the Joint Chiefs of Staff. He’s even pressured private-sector companies and institutions — often successfully — to end DEI programs.
“When we were making the case for Lisa Cook’s nomination, we found that only two of 417 Federal Reserve staff positions at the time were Black; 318 of them were White. That’s a really big problem,” said Saqib Bhatti, co-founder and executive director of the Action Center on Race & the Economy.
Experts tell CNN the Fed benefits greatly from having leaders with diverse professional and personal backgrounds.
The White House did not respond to a request for comment but has defended Trump’s firing of Cook as legal and prudent. White House spokesman Kush Desai said in a statement on Thursday after Cook filed her lawsuit that “the President determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions.”
The Trump administration has said the other Black government officials who lost their job were fired because of their political leanings or involvement in DEI programs.
“What I think Lisa Cook brings to the Federal Reserve… is (her) deep understanding of historical discrimination and its destructive impact on the economy, particularly through the channels of entrepreneurship and innovation,” Jared Bernstein, who was the chair of the Council of Economic Advisers under Biden, told Bloomberg on Tuesday.
Fed policymakers regularly comb through vast swaths of data and research to understand America’s dynamic $30.3 trillion economy — and how interest rates could impact inflation and the labor market. How all that information is interpreted varies from official to official.
“To have better decision-making and better understandings of the economy, you need to have governors at the Fed with a broad range of experiences,” said Sameera Fazili, the former director of engagement at the Federal Reserve Bank of Atlanta. “Diversity at the Fed is not just about better data interpretation, but also about increasing the legitimacy of the institution and the trust it has from the American public.”
Fazili said a Fed board that reflects the diversity of America helps “to communicate its policy with all audiences in the US as well.”
Diversity at the Fed has been a historical problem
The Fed was established in 1913, but there wasn’t a person of color on the Board of Governors until Andrew Brimmer, a Black man, was appointed in 1966. The first woman to serve on the Fed’s board was Nancy Teeters, who was appointed in 1978.
So far in its history, the Fed has had 12 women, five Black people and one Hispanic person serve on its board, according to the Congressional Research Service. But the Fed’s diversity problem hasn’t just been at the upper echelons of the institution.
A 2021 study from the Brookings Institution showed that the boards of the 12 regional Fed banks across the country have historically been “overwhelmingly white (and) male… with little participation from minorities, women, or from areas of the economy—labor, nonprofits, the academy—with important contributions to make to Fed governance.”
“The first nonwhite directors were not appointed by the Board of Governors until the 1970s. Even as late as the 2010s, nonwhite directors represented less than 10% of the total directors in any given year,” the report said.
Each regional Fed bank has a nine-member board of directors that oversees its activities, ranging from banking regulation to community engagement. Six of them are elected by member commercial banks and the other three are appointed by the Fed’s Board of Governors.
Cook’s focus on the economics of racial discrimination
Cook is one of the country’s leading experts on economic inequality.
Her most cited research on the topic is her 2014 paper, “Violence and Economic Activity: Evidence from African American Patents, 1870 to 1940,” which found that lynching and racial violence in the 20th century significantly lowered the number of patents filed by Black inventors.
“Cook’s perspective as a Black woman and an economist enables her to offer an important perspective on economic history directly relevant to the Federal Reserve’s full employment mandate, but she also brings needed expertise on topics such as innovation in an economy that is rapidly changing,” said Jessica Fulton, interim president and vice president of policy at the Joint Center for Political and Economic Studies, a nonprofit that studies the challenges facing Black Americans.
Republicans, however, have scoffed at her research background, especially during her Senate confirmation hearing. Former Sen. Pat Toomey of Pennsylvania was one of the loudest opponents of Cook’s nomination, describing her research background as “extreme left-wing political advocacy.” Representatives for Toomey did not respond to CNN’s request for comment.
Cook was ultimately confirmed through a tie-breaking vote by then-Vice President Kamala Harris.
CNN’s Alicia Wallace contributed reporting.
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