Thomas Fanning, who led the search committee that selected Atlanta Fed President Raphael Bostic in 2017, said the committee sought suggestions for candidates from the Fed board as well as leaders of other reserve bank searches.
Fanning said he met three times with Yellen during the six-month search process, and around six times in Washington—and as many over the phone—with Powell, who was then a governor.
“It’s a very collegial process,” said Fanning, the chairman of Atlanta-based utility Southern Co. “I touched base with Janet from time to time, but stayed very close with Jay and remain friends with him to this day.”
The goal was to pick someone with “rock-solid economics in their background” and “a very high EQ,” or emotional quotient, said Fanning, who is no longer on the Atlanta Fed board.
Diverse Candidates
Current and former Fed leaders say the search process is intended to find the best candidates for the jobs, with a focus on diversity.
“I am really proud that we had a diverse and broad pool” of candidates, former Fed Governor Randal Quarles said. He was on the board when it approved Mary Daly and John Williams—both longtime Fed insiders—as presidents in San Francisco and New York, respectively.
When it comes to finding outside candidates, stricter rules about conflicts of interest have complicated the searches.
The Kansas City search was delayed when one leading candidate dropped out late in the process over rules governing financial conflicts. The committee also wanted to hire someone with ties to the Western district, which made the search more challenging, officials said. They ultimately decided on Schmid, an official at Southern Methodist University’s Cox School of Business.
Requirements to divest assets might discourage some qualified people from considering the jobs, said former St. Louis Fed President James Bullard, now dean at Purdue University’s Daniels School of Business.
“That is a complicated issue that would take time to resolve for some candidates,” Bullard said. “People that were already under those rules wouldn’t have that issue.”
Political Scrutiny
Congressional oversight of the regional Fed banks has also become more intense following controversies in recent years, including the resignation of two presidents following revelations of unusual trading activity in 2020.
Senate Banking Committee Chairman Sherrod Brown of Ohio and Senator John Fetterman of Pennsylvania last month urged the Cleveland Fed to share more information about its presidential search process, and involve more stakeholders. Senator Robert Menendez, who led calls for the regional banks to appoint a Hispanic president, said a proposal to make the regional leaders presidential appointees has merit “because it does not seem that the Reserve System itself is going to diversify.”
Most economists surveyed by Bloomberg say searches have resulted in very good or good choices for Fed presidents, with 17% saying the officials are fair or poor. Still, about half of them say the century-old regional structure of the banks should be improved and a quarter say there needs to be more transparency in selecting presidents.
Searches have gotten “far more politicized,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “This may be why the board has gotten more involved, as they attempt to manage the political angle.”
This article was provided by Bloomberg News.