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Washington Wrap — Diversity in focus as search for NY Fed president continues

The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. Send tips and ideas to and

At the Fed

A debate over diversity at the Federal Reserve erupted this week amid reports that the front-runner to take over the New York Fed is, yet again, a white man.

John Williams, the current San Francisco Fed president, faced backlash after The Wall Street Journal reported that he is the leading candidate for the role. Critics argue the Fed should take advantage of the upcoming vacancy to diversify the central bank's top ranks.

Williams' colleagues have come to his defense.

For example, Atlanta Fed President Raphael Bostic, the Fed's first black regional president, told the WSJ that the New York Fed "would be very lucky" to have Williams and praised his management skills and economics pedigree. Williams joined the San Francisco Fed in 2002 and was previously an economist at the Fed's Board of Governors.

But Sen. Kirsten Gillibrand, D-N.Y., said in a statement that the branch "has never been led by a woman or a person of color, and that needs to change." She said it is "unacceptable that this powerful position is virtually unchecked by Congress," calling for a public confirmation process and more oversight from Congress.

Sen. Elizabeth Warren, D-Mass., also called for more transparency, saying Williams and the search committee leaders should testify in the Senate if he is picked and that the Fed's Board of Governors should not approve the selection until that happens.

Philadelphia Fed President Patrick Harker, who praised Williams in a WSJ interview, told reporters March 29 that he was concerned that giving Congress a role in picking regional Fed presidents could undermine the central bank's independence.

"Would you do that for all 12 Fed presidents and supersede the roles of the [regional Fed] banks and their boards?" he said.

Meanwhile, William Dudley, the departing New York Fed president, spoke at the U.S. Chamber of Commerce and called for heavier penalties on top leaders of financial institutions that have erred, saying a stricter approach could decrease risks to the financial system.

At the regulators

The Office of the Comptroller of the Currency and the Fed appear to be looking at whether the Community Reinvestment Act needs an update.

Comptroller of the Currency Joseph Otting said March 28 that his agency is finalizing a proposal to "revolutionize" the law, which has been in place since 1977 and aims to ensure that banks are serving low- and moderate-income communities.

Otting said the OCC expects to put the proposal out for comments in April but gave a preview of some major elements, including a platform for the public to compare banks' CRA ratings and an expansion of the types of lending that qualify for CRA credits. Fed Vice Chairman for Supervision Randal Quarles spoke earlier in the week and similarly expressed interest in modernizing the CRA.

Other news

Otting is also focused on small dollar lending, telling The Wall Street Journal that the OCC will "clarify" its stance on 45- to 90-day loans within the next two months. Otting's predecessor, Keith Noreika, had already scrapped the OCC’s 2013 guidance discouraging deposit advance products that generally cover periods shorter than 45 days.

Small dollar lending has also been the focus of congressional Republicans hoping to target the Consumer Financial Protection Bureau’s rules on the broad category of payday loan products. On March 22, Sen. Lindsey Graham, R-S.C., introduced a measure that would nullify the CFPB's payday rule, which is already on ice under Acting Director Mick Mulvaney.

Congress is also taking aim at the CFPB’s guidance regarding indirect auto lending. Sen. Jerry Moran, R-Kan., introduced March 26 a resolution that would repeal a 2013 note warning lenders of possible violations of the Equal Credit Opportunity Act.

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