Richmond Fed Names McKinsey's Thomas Barkin as Its President

(Bloomberg) -- Directors at the Federal Reserve Bank of Richmond confirmed Monday they had chosen Thomas Barkin, a senior executive at global consulting firm McKinsey & Co., as the institution’s next president.

“We are fortunate to have found an extremely well-qualified individual to serve the Federal Reserve’s Fifth District and the American people,” Margaret Lewis, chair of the Richmond board of directors, said in a statement.

Barkin’s appointment was approved by the Fed’s Board of Governors in Washington, according to the statement. Michelle Smith, a spokeswoman for the Board of Governors in Washington, declined to comment.

Barkin, 56, will succeed Jeffrey Lacker, who resigned in April after admitting his role in the leak of confidential, market-sensitive information to a Wall Street newsletter.

Barkin is a senior partner and chief risk officer at McKinsey, where he has overseen offices across the southern U.S. A 30-year veteran at the firm, he served as chief financial officer from 2009 to 2015.

Attracted Criticism

Barkin holds a bachelor’s degree in economics, a law degree and a master’s in business administration from Harvard University. He’s a former chairman of the Atlanta Fed’s board of directors.

The selection of Barkin to serve as a policy maker at the world’s most important central bank has already attracted criticism. While steeped in managerial and consulting experience, in some cases for financial firms, he has no background in monetary policy making. Nor does the decision satisfy critics who have called for more gender and racial diversity in the Fed’s leadership.

The activist group Fed Up, which has repeatedly called for more openness in the selection of Fed presidents, said it was disappointed in the news of Barkin’s selection. The Richmond Fed’s board “chose a financial industry adviser who is likely to prioritize the investor class’ interests over working people’s interests,” the group’s co-director, Shawn Sebastian, said in a statement.

Voiced Concern

Aaron Klein, a fellow at the Brookings Institution in Washington, also voiced concern over the pick. “It is disappointing that reserve banks continue the pattern of selecting members of their own or each other’s boards of directors at a time when the Fed is in need of diverse and fresh thoughts,” he said.

Barkin was in the news in October when he apologized for the role McKinsey employees may have played in a corruption scandal in South Africa. McKinsey is being investigated by a South African parliamentary committee over whether it knowingly allowed money from Eskom Holdings SOC Ltd., a state-owned electric power provider, to be diverted to a private company with ties to President Jacob Zuma in order to win a $78 million contract to advise Eskom.

“There are things we wish we had done differently and will do differently in the future,” Barkin said in October. “We reject the notion that our firm was involved in any acts of bribery or corruption.”

Complex Functions

McKinsey said Nov. 16 it will repay about $70 million it received in fees from Eskom, regardless of whether the contract is found to be unlawful. No one has accused Barkin of any role in the matter.

Regional Fed presidents serve as chief executives of their institution, overseeing complex functions within the U.S. central bank’s structure -- from payments systems and banking supervision to large-scale technology operations.

All 12 regional Fed presidents also sit on the policy making Federal Open Market Committee, along with Fed governors who are based in Washington. The FOMC sets the Fed’s benchmark interest rate and makes other monetary policy decisions central to the health of the U.S. economy. Richmond’s president will be a voter on the FOMC in 2018.

Since Lacker’s departure, the bank’s first vice president, Mark Mullinix, has represented Richmond on the FOMC. The Richmond Fed’s recent past presidents have held hawkish views on monetary policy.

Other Changes

The Fed’s district bank presidents are chosen by their respective boards of directors, and approved by the Board of Governors. Following the financial crisis, Congress changed the Federal Reserve Act to exclude bankers who sit on regional Fed boards from participating in the selection of regional bank presidents.

Within the Fed, other changes have been made in recent years to the presidential search and selection process, with the Board of Governors significantly increasing its oversight. That effort is led by the Fed’s Committee on Federal Reserve Bank Affairs, currently led by Jerome Powell. A governor since 2012, Powell was nominated in November by President Donald Trump to succeed Janet Yellen as Fed chair when her term expires in February.

Despite those changes, the selection process has remained controversial, with critics saying it lacks transparency, favors insiders and has included too few women and minorities.

The Philadelphia Fed drew fire in 2015 when its board chose one of its own members, Patrick Harker, who served on the search committee to find a replacement for Charles Plosser.

To contact the reporter on this story: Christopher Condon in Washington at ccondon4@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Randall Woods

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