Two N.Y. Fed Directors Opted Out of Search Process for President

(Bloomberg) -- In choosing John Williams to be the next president of the Federal Reserve Bank of New York, its directors completed the most important task their office demands. It’s the most direct way they can influence the path of monetary policy at the nation’s central bank.

But not every eligible director participated fully in the search and selection process. That was an unusual departure from the practice of almost every other regional Fed to run a search for a new leader since 2014.

Charles Phillips and Rosa Gil, who joined the New York Fed’s board effective Jan. 1, declined opportunities to participate on the search committee that undertook the bulk of the work in selecting the new president. That committee designed the search process, established the key attributes sought, conducted 11 first-round and three second-round interviews, and recommended one finalist.

So Phillips and Gil were left with one decision after the search was complete: yes or no on Williams, and both supported him. Advocates for greater diversity at the U.S. central bank reacted with frustration to news that Williams, who is white, had been picked despite pressure to select a woman or racial minority.

“The search committee was fully constituted when I joined the board, and the process far enough along that it would not make sense to restart,” Phillips, chief executive officer of cloud software company Infor, said in an emailed statement. “I have been informed and engaged with the New York Fed chair selection process since my first weeks on the board.”

Gil, founder and chief executive officer of Comunilife Inc., a non-profit provider of health and housing services in New York City, didn’t respond to emails and phone messages seeking comment.

Influenced Search

Suzanne Elio, a spokeswoman for the New York Fed, said Phillips and Gil influenced the search process without taking part in the panel’s work directly.

“The search committee has benefited from the input of the board of directors’ newest members,” she said in an emailed statement.

The pair weren’t the only ones who opted out of the search committee. When the panel was formed late last year, directors decided the committee would include only those whose terms would run for the full length of the expected search process. That meant Emily Rafferty was also left out during the final months of her term, which expired Dec. 31.

Another director whose term expired on Dec. 31, Terry Lundgren, executive chairman of Macy’s Inc., was disqualified because the retailer owns a thrift bank.

Gang of Four

Only four directors served on the search committee from it start to its effective conclusion. They were Sarah Horowitz, the board’s chair and executive director of the Freelancers Union for independent workers; Glenn Hutchins, founder of private equity firm Silver Lake; Denise Scott, executive vice president of the Local Initiatives Support Corp., a community development non-profit; and David Cote, formerly the executive chairman of Honeywell International Inc., who resigned from the New York Fed board on March 17 shortly after the search committee settled on Williams.

Cote stepped down to pursue a business opportunity that could affect his eligibility to serve on the board, the New York Fed said. As a Class B director, Cote is prohibited from holding any affiliation with a bank.

Under the Dodd Frank Act of 2010, the three bankers on the board were automatically excluded from the search and selection.

Of six other Fed regional reserve banks that have selected new presidents since 2014, five said all non-banking directors served on their search committees. None were excluded or opted out, although one Philadelphia director joined that search committee very late in the process in 2015.

Only Richmond limited its search committee to four of its six eligible directors in 2017. Jim Strader, a spokesman for Richmond, said he couldn’t comment on why directors did so. McKinsey & Co. executive Thomas Barkin was picked for the Richmond job, renewing complaints over a lack of transparency in the process.

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, Alister Bull

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