May 25, 2021

ICYMI: Washington Examiner Editorial Board: We don’t need a woke Fed

Washington, D.C. – In case you missed it, ahead of today’s Senate Banking Committee hearing with Federal Reserve Vice Chairman for Supervision Randal Quarles, the Washington Examiner Editorial Board published a piece applauding Ranking Member Pat Toomey’s (R-Pa.) review of woke mission creep at the regional Federal Reserve Banks.

Ranking Member Toomey yesterday expanded
his review of the regional Federal Reserve Banks’ increasing focus on politically-charged issues, requesting briefings and documents from the Minneapolis, Boston, and Atlanta regional Federal Reserve Banks on their recent “racial justice” activism, an activity that is outside the bounds of the Fed’s mission and statutory mandate.

Read the Washington Examiner’s editorial here
or below.

We don’t need a woke Fed

by Washington Examiner | May 25, 2021 12:01 AM

Racial equality is an incredibly important cause, but we don't understand what it has to do with the Federal Reserve. We suspect the Fed doesn't have a clue, either.

So it’s a good thing Sen. Pat Toomey is asking it.

Congress created the Federal Reserve and has given it a clear but always tricky mandate: to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” The Fed system consists of a board of governors as well as regional banks, whose board members are, unfortunately, always angling for promotion to the big leagues — the Federal Reserve Board of Governors.

Toomey wants to know why government bankers at the Minneapolis Fed have found it crucial to state they have “renewed our commitment to dismantling structural racism?” The treasury bonds they are supposed to sell do not really have much to do with “dismantling structural racism” one way or the other.

Indeed, as with corporate wokeism, Fed wokeism is all about empty gestures. In this case, it’s the boilerplate “racial justice” language in the Minneapolis Fed’s annual report, along with working papers. For instance, the bank recently published a working paper on the best way to pay reparations, another issue the Fed has nothing to do with.

Everyone should care about racial justice. For example, it is interesting work for economists to study the disparate impact of direct payments versus entrepreneur subsidies. But this isn’t the job of a Federal Reserve Bank.

“It is not the proper role of the Federal Reserve to be engaging in political advocacy,” Toomey correctly states in his new letter. Also, these regional Federal Reserve banks have no special competency on the issue of racism. So why are they doing this?

The simplest explanation is that Minneapolis Fed President Neel Kashkari, a former politician, is running to be chairman of the Fed’s board of governors. These days, that means impressing Joe Biden and the Democratic Congress.

Kashkari has competition from Raphael Bostic, the president of the Atlanta Fed. Bostic published a letter on “a moral and economic imperative to end racism.” He has given multiple speeches on “racial equity.” In line with the political correctness of the time, he inveighed against Georgia’s election reform law.

As Toomey has written, “this subject matter is fraught with ideological assumptions and interpretations, and the work and analysis of” the regional banks “[seem] heavily laden with political and value judgments.” There's no agreement on what "systemic racism" is, and some of the Left's definitions of the term simply don't line up with reality. Choosing to focus on "systemic racism" is inevitably politically charged.

That's why the Fed should stay away. Congress has given the Fed far more leeway than any other part of government. Presidents and Fed board members have lengthy terms, and the elected branches at least try not to meddle with their decision-making. But with great power comes great responsibility to political neutrality. Becoming a woke Fed betrays that responsibility.

It’s not adequate to say that racism is related to economics. Everything is related to economics. The Atlanta Fed or Minneapolis Fed aren’t turning out papers on how church closures and the birth dearth interact with the economic woe of the working class. They aren’t publishing papers on the sexual revolution’s devastating effect on marriage and thus the prospects of poor people born to single mothers.

The banks seem to be choosing social topics that appeal to liberal cultural elites and the current party in power. It's not appropriate, and Toomey is right to call it out.