Just 10 Black Americans have been appointed to lead America’s financial regulators since the 1930s, according to research published Wednesday.
Even though Black Americans make up 13.4% of the US population, they have captured only 3% of political appointments at pivotal financial agencies including the SEC, FDIC and Federal Reserve over the last 70 years, the working paper published by the Brookings Institution found.
The lack of diversity in the upper ranks of financial regulators means that Black Americans have been largely excluded from crucial decisions in America’s capitalist system, on everything from regulating banks and deciding how capital is distributed to implementing sweeping legislation like the Fair Housing Act and Dodd-Frank.
“The consequence is that African Americans have had little, and usually no direct say in the very shape and operation of finance, the lifeblood of capitalism and the US economy,” Chris Brummer, faculty director at Georgetown University’s Institute of International Economic Law, wrote in the paper.
The findings come as the United States grapples with unrest over police brutality against Black Americans and an alarming gap between the nation’s rich and poor.
Because financial regulators are tasked with “creating the rules of the road for America’s capitalist system,” Brummer argues the “systemic absence” of Black Americans poses “enormous challenges from the standpoint of participatory democracy and economic inclusion.”
One appointment every 10 years
That’s not to say Black Americans have not been appointed to major roles in regulatory agencies.
In 1997, economist Roger Ferguson was appointed by President Bill Clinton to be a member of Federal Reserve Board, becoming the group’s vice chair in 1999. As the only Federal Reserve governor in Washington DC on 9/11, he directed the US central bank’s initial response to the terror attacks. Ferguson huddled with a staff of about 100 to coordinate the Fed’s efforts to calm the panicked financial markets. He stepped down in 2006 and is now president and CEO of TIAA, a financial services firm with more than $1 trillion in assets.
More recently, President Barack Obama picked Mel Wat to lead the Federal Housing Finance Agency, which is charged with overseeing Fannie Mae and Freddie Mac.
And last year, President Donald Trump nominated Rodney Hood as chairman of the National Credit Union Administration, which regulates federal credit unions.
But these appointments are the exception.
The Brookings Institution research found that over the last 90 years, an average of just one Black American has been appointed to a federal financial regulatory agency every 10 years. Just three of the 10 Black American appointees have been women.
“One of the biggest open secrets in Washington, DC is the virtual absence of African-American financial regulators in the United States government,” Brummer wrote. “Across the federal government, they are missing, and have been missing for generations, with at best short appearances by single political appointees two to three years at a time.”
For instance, there has never been an Black head of the FDIC, SEC, Office of the Comptroller of the Currency or Commodity Futures Trading Commission. And there aren’t currently any African American commissioners at the SEC or the CFTC.
And just 3.2% of the political appointees to the Fed have been Black, the paper said.
Likewise, the staffs of political appointees at financial regulators are “almost devoid” of Black Americans, Brummer wrote. As of July 4, 2020, just 4.2% of the senior policy staff at regulators were Black.
The paper described this problem as a “bipartisan failure” that has little to do with party affiliation.
“Both parties, Republican and Democrat, have systematically failed to nominate African Americans to positions of power,” Brummer wrote.
In particular, the paper faults US Senators, who often suggest or sponsor appointments to the White House, for declining to sponsor diverse individuals to key posts.
Explaining the lack of diversity
It’s not clear precisely why Black Americans have been excluded from these key roles, but the paper suggests some explanations, and shoots down others.
For instance, Brummer said one theory is that Senators may hold “preconceived notions” or may believe “stereotypes about the intelligence or competence of Blacks.”
But Brummer said it is “implausible” to argue that Black Americans are not qualified.
He points to the fact that the United States currently has more than 46,000 Black American lawyers and Harvard Law alone has produced nearly 3,000 Black law school graduates sine its first Black student graduated in 1869.
“It is a near impossibility that no African American lawyers meet the academic and professional qualifications for political appointments, or staff positions,” Brummer wrote, “especially when measured against the qualifications of past White regulators with far less selective credentials.”