Selecting a Federal Reserve Bank President

After former St. Louis Fed President Jim Bullard announced in July 2023 that he was stepping down to become the inaugural dean of Purdue University’s business school, the Bank embarked on a search for its next leader.

The next president and CEO will lead the work of the Bank and contribute to U.S. monetary policy decisions at the Federal Open Market Committee (FOMC). It’s an important job—and so is the job of choosing the person who will fill the role.

So how does the search process work? What kinds of candidates are being sought? Speakers gave answers to those and other questions about the St. Louis Fed’s presidential search during a virtual public engagement forum the Bank held on Sept. 7, 2023.

Karen Branding, senior vice president and corporate secretary of the St. Louis Fed, moderated a discussion with four panelists:

• James M. McKelvey Jr., chair of the St. Louis Fed board of directors and chair of the Search Committee
• Carolyn Chism Hardy, deputy chair of the St. Louis Fed board of directors and deputy chair of the Search Committee
• Tom Daniels, member of the Spencer Stuart executive search and leadership consulting firm selected to assist with the search
• François Henriquez, St. Louis Fed executive vice president, chief administrative officer and general counsel

Branding and Henriquez are the support team to the Search Committee.

“Our aim is to get the word out about our search, and to help the public better understand how the process works and have an opportunity to engage and ask questions,” Branding said at the beginning of the public engagement forum.

How the Search Process Works

The process of selecting a Federal Reserve bank president is set out in federal law, with its origins in the Federal Reserve Act of 1913.

As Branding explained, the first step is for a Reserve bank’s board of directors to appoint a presidential search committee, which must be composed of a subset of the Bank’s board: its Class B directors, who are elected by banks in the Reserve bank’s district to represent the public; and its Class C directors, who are appointed by the Federal Reserve Board of Governors to represent the public.

The remaining directors, who are Class A directors elected by banks in the Reserve bank’s district to represent banks’ interests, “are precluded by law from participating in the appointment process [of Reserve Bank presidents] to avoid actual or perceived conflicts of interest,” Branding explained.

The People Involved in the Search Process

In a video clip from the virtual public engagement forum, St. Louis Fed Senior Vice President and Corporate Secretary Karen Branding explains the steps and people that are part of the search process. Follow along with the transcript below.

Transcript

Karen Branding: Now, the Federal Reserve Act is very prescriptive about how the process works for appointing a new Reserve bank president.

The first step is for the directors to appoint a presidential search committee, which by law must be composed of a subset of the bank’s board. So let me back up and explain how Reserve bank boards work. By law, reserve banks have nine directors. Three of them are what are called Class A directors. And by law, they’re elected by banks in our Reserve bank district to represent the interests of banks.

There’s also three Class B directors, and they are elected by the banks in our District to represent the public, and then, finally, three Class C directors who are appointed by the Board of Governors in Washington to represent the public. So, we have nine directors, but by law only the Class B and C directors can appoint a Reserve bank president. And their appointment is subject to the approval of the Board of Governors in Washington. Class A directors, again, those that represent the interest of banks, are precluded by law from participating in the appointment process to avoid actual or perceived conflicts of interest.

So, at our July board meeting, the directors appointed a presidential search committee that includes all six of our Class B and our Class C directors. And it’s an outstanding search committee. I believe there should be showing on your screen now the members.

And I’d like to introduce them to you orally here. First, Andrew Clyde—he’s the CEO of Murphy USA in El Dorado, Arkansas—Penny Pennington, the managing partner of Edward Jones, based here in St. Louis; Michael Ugwueke, CEO of Memphis Le Bonheur Healthcare in Memphis; Jim McKelvey, who I’ve just introduced; Carolyn Chism Hardy, also just introduced; and then, finally, Lal Karsanbhai. He’s the CEO of Emerson, which is also based here in St. Louis.

The St. Louis Fed’s board of directors appointed the six-member Presidential Search Committee comprising its Class B and Class C directors at its July 2023 board meeting, Branding said. The members are shown in the graphic below.

Reserve bank search committees interview candidates and evaluate their qualifications before forwarding their top choices to the Federal Reserve Board of Governors. The Board reviews and interviews the candidates, and then the six Reserve bank directors representing the public appoint the new president, subject to the Board of Governors’ approval.

An Executive Search Firm to Support the Search

After the Search Committee formed, one of its first steps was to interview several highly qualified executive search firms to support the process. The Search Committee ultimately selected Spencer Stuart to assist in a “broad search process that is robust, transparent, fair and inclusive,” as detailed in the St. Louis Fed’s presidential search frequently asked questions webpage.

Typical searches take six to nine months, McKelvey said during the forum. For the St. Louis Fed presidential search, the deadline is Sept. 28, 2023, for indications of interest, nominations and referrals with supporting documents to be sent to stlouisfedpresident@spencerstuart.com.

Having the nominations go directly to the search firm preserves candidate confidentiality, Branding said.

The Experience and Skills the St. Louis Fed President Needs

Reserve bank presidents oversee their banks’ work related to monetary policy, economic research, bank supervision and community development, among other activities. They also represent the voice of Main Street on the Federal Open Market Committee.

The St. Louis Fed president’s job is complex, and the 10-page job profile (PDF) includes a list of ideal qualifications and gives a sense of the many qualities and key competencies that are required, Chism Hardy said during the forum.

The role doesn’t require a Ph.D. in economics, but representing the voice of the Eighth Federal Reserve District and being at the FOMC table are among the most important parts of the job, Chism Hardy said. (The Eighth District spans seven states, including all of Arkansas and portions of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.)

“So, the ideal candidate needs to have, among other things, respected credentials in macroeconomics or recognized stature in the field that contributes information that’s vital to monetary policymaking,” she said.

Monetary Policy Stature and Communication Skills

Search Committee members Carolyn Chism Hardy and Jim McKelvey describe some of the qualifications the ideal presidential candidate would have in a video clip from the virtual public engagement forum. Follow along with the transcript below.

Transcript

Carolyn Chism Hardy: So the ideal candidate needs to have, among other things, respected credentials in macroeconomics or recognized stature in the field that contributes information that’s vital to monetary policymaking.

Karen Branding: Great. Thank you, Carolyn. And Jim, other questions get to more of a broader look at what exactly are you looking for. Could you expound on what Carolyn said and just take it a little further in terms of the different qualifications we’re looking for?

James M. McKelvey Jr.: Yeah. So the first thing we’re looking for is someone who really understands monetary policy. And monetary policy is this sort of misunderstood thing. Now, among economists, of course, they all understand, but monetary policy really affects real people.

It affects Main Street. It affects all of us. It affects what your car costs and your house costs, and these decisions that we make in these banks are really important. So, you have to, first of all, understand that, which we think is sort of a minimum thing. But then we’re looking for a leader, somebody who can communicate very well and, in some cases, persuade.

A minimum requirement is an understanding of monetary policy and how it “really affects real people,” McKelvey said.

“It affects Main Street,” he said. “It affects all of us. It affects what your car costs and your house costs.”

But the Search Committee also is looking for a leader who “can communicate very well and, in some cases, persuade,” he said.

Asked later if candidates should be from inside or outside the Fed, Chism Hardy said the Search Committee would be considering both.

“It is going to take someone with the right leadership skills and the right leadership experience,” she said.

Reserve Bank President Ethics Requirements

In addition to the experience and other qualifications needed to be a good leader of a Reserve bank, presidents also must adhere to codes of conduct and restrictions, including avoiding actual or apparent conflicts of interest.

Conduct Codes and Policies

St. Louis Fed Executive Vice President François Henriquez (left) discusses restrictions and conduct requirements for the Bank president in a video clip from the virtual public engagement forum. Follow along with the transcript below.

Transcript

François Henriquez: All presidents have a special obligation to maintain the integrity and reputation of the Federal Reserve System. And to make sure that people understand what those requirements are, the Fed has a number of rules and regulations. And I’m just going to mention a couple of them right away.

But first, like everybody who’s an employee of the Federal Reserve Bank, they’re subject to a code of conduct that focuses on making sure that there are no actual or apparent conflicts of interest. So that’s number one, and that would be true for any employee of the Bank. But on top of that, the Board of Governors has its own code of conduct for senior officials of the Federal Reserve System. And that, of course, would apply to our president too.

And there are several heightened requirements. So, a couple of things. One is they have to do everything that they can to maintain the integrity, dignity and reputation of the System. They have to scrupulously avoid any conduct that might embarrass the system or impair the System’s operations. They have to ensure that their personal financial dealings are always above reproach. And finally, they have to ensure that any information that they obtain remains confidential and is never used for personal gain.

And then, finally, as a member of the FOMC, the president would be subject to even further restrictions. And this is fairly new, and some people may not be aware of this. But now Federal Reserve bank presidents are subject to investment and trading limitations.

These are very, very detailed, very complex, and in some respects rather restrictive. We don’t have time to go through them all here right now, but I would invite anybody who’s interested to go to the FAQs on that presidential website.

The Board of Governors also has its own code of conduct for senior officials of the Federal Reserve System that would apply to the St. Louis Fed president, Henriquez said.

He outlined some of the requirements, including that they “do everything that they can to maintain the integrity, dignity and reputation of the System.” Senior officials also have to ensure that their personal financial dealings are “always above reproach” and that they safeguard the confidentiality of information, he said.

As a member of the FOMC, the president also would be subject to “fairly new” investment and trading limitations that also apply to spouses, minor children and trusts, Henriquez added.

Links to documents outlining codes of conduct, Federal Reserve ethics and values, and the restrictions on investment and trading for FOMC officials are outlined on the FAQ page.

The Significance of the St. Louis Fed President

The open position of St. Louis Fed president is “an incredible opportunity,” said Daniels, of Spencer Stuart. The consulting firm has assisted in several Reserve bank presidential searches, including the search that resulted in the selection of former President Jim Bullard.

The St. Louis Fed is a leading institution with almost 1,500 employees across seven states, Daniels said. The Bank also has “a long-standing reputation for being a bold and innovative thinker when it comes to monetary policy,” he said. “And that’s a great legacy that I think a lot of people would love to embrace.”

St. Louis Fed Leadership

Tom Daniels (right), of the executive search and leadership consulting firm Spencer Stuart, outlines what makes the St. Louis Fed stand out in a video clip from the virtual public engagement forum. Follow along with the transcript below.

Transcript

Tom Daniels: In terms of attractiveness of the role, this is an incredible opportunity. And as Jim alluded to already, there’s already been strong interest. This is a leading institution with almost 1,500 people across seven states and being the voice across the District. It’s also…St. Louis has a long-standing reputation for being a bold and innovative thinker when it comes to monetary policy. And that’s a great legacy that I think a lot of people would love to embrace. And then, thirdly, it plays a critical role in not only the Fed system but in the U.S. Treasury, supporting the U.S. Treasury. It also supports FRED, which is the leading source of macroeconomic data in the world. And it also supervises the second largest number of community banks in the country. So, it plays a leading role in that. So, this is very attractive.

The St. Louis Fed also plays a critical role in supporting the U.S. Treasury and in providing FRED, a leading source of macroeconomic data, Daniels noted, as well as in supervising the second largest number of community banks in the country.