Introduction

Rule X of the House of Representatives assigns the Committee on Banking, Finance and Urban Affairs broad investigatory powers over the operation and activities of the agencies and departments subject to its legislative jurisdiction.

As part of the Committee on Banking, Finance and Urban Affairs' continuing oversight of the Federal Reserve System, letters requesting specific information regarding equal employment opportunity (EEO) were sent to the Board of Governors of the Federal Reserve System (Board) and each of the twelve Federal Reserve Banks (Reserve Banks). What follows are findings and recommendations, a summary of the Board's and each of the Reserve Bank's reported information on this issue and copies of the letters and their responses.

1

1)

FINDINGS

Minorities and women are significantly underrepresented at the highest levels of the Federal Reserve Board and the Federal Reserve Banks.

Systemwide, there are no minorities and few women at the senior officers level. Even more disturbing, the limited representation of women and minorities in the "pipeline" (grades 1416) to official level positions, demonstrates that increased minority and women representation is unlikely to occur in the near future.

2)

The Board's method of grading the Reserve Banks' Equal Employment Opportunity and staffing statistics does not accurately reflect Reserve Bank performance.

The Reserve Banks are considered private entities with regard to EEO issues, and therefore are not required to file their affirmative action plans with the Equal Employment Opportunity Commission (EEOC). Instead, the Reserve Banks provide this information to the Board for evaluation. However, the Board's grading method is not formalized and is subjective in nature. The Board evaluates the status of the Reserve Banks by measuring each Reserve Bank's actual staffing statistics in relation to the work force availability and the goals established for each EEO-1 category (Officers and Managers, Professionals and Technicians.) The Board's EEO Programs Officer can alter these grades by weighing other unspecified information. However, the Banks set their own goals, which are usually based on the work force availability data that, again, they choose. This method of evaluation not only allows the Banks to, in effect, determine their own grades, but more importantly, penalizes those Banks that set higher goals. It is therefore not surprising that the Reserve Banks' goals are less than ambitious.

3)

Affirmative action plans lack results-oriented goals and sufficient monitoring.

The Federal Reserve Board and the Federal Reserve Banks provided extensive information on their affirmative action efforts. However, in many cases these efforts are not monitored in relation to actual staffing goals and statistics. In addition, many of the programs that are detailed do not address deficiencies in minority and women representation at specific levels of the Reserve Banks. Most importantly, relatively few Reserve Banks provided information on initiatives tailored to increase minority and women representation in the critical official and managerial positions.

4)

Those employees responsible for Equal Employment Opportunity (EEO) programs are too far removed from Presidents and Board of Governors.

The Board's rules on Equal Employment Opportunity state that the EEO Officer should be a senior officer (senior vice president or above) independent of the personnel or human resources departments who reports directly to the president or first vice president of the Reserve Bank (see Federal Reserve Bank of Cleveland's response attachment 1 d. 1.) Even though the Board maintains that it has followed this approach, its own EEO programs officer is not a senior officer and does not report to the Board or the administrative governor directly. The Board has

failed to implement its own policy even after the Board's inspector general issued a report in 1989 strongly recommending compliance with this EEO policy. It is, therefore, not surprising that many of the Reserve Banks have not instituted this policy.

5)

Lack of recruitment efforts at predominately minority colleges and universities.

It is incomprehensible that the Board and Reserve Banks defend the lack of minorities in official and managerial positions by pointing to the difficulties they have faced in recruiting qualified minority candidates, when only two of the Reserve Banks stated that their recruiting efforts included visits to predominately minority colleges and universities.

RECOMMENDATIONS

1) The Board and the Reserve Banks must take immediate action to increase the hiring and promotion of minorities and women.

It is evident that minorities and women are underrepresented at the important decisionmaking levels at the Board and Reserve Banks. A real commitment by the Board of Governors and the Presidents of the Federal Reserve Banks and implementation of comprehensive programs are necessary to effect change. The lack of minorities and women is evidence that neither exists.

2) The Board's method of grading the Reserve Banks for equal employment opportunity should be changed to accurately reflect Reserve Banks' performance.

Since the Board is the only body to review the Reserve Bank's status on EEO, it is imperative that the Board's grades and evaluations truly reflect the Reserve Banks' EEO performance. To achieve this, the Board's grading system must be comprehensive, uniform, consistent, objective and formalized. Most notably, it is inappropriate and unacceptable to continue to base the Reserve Bank's grades almost entirely on their ability to meet the goals for women and minority representation that they themselves set.

3)

effects.

Affirmative action efforts should be results-oriented and monitored regularly to measure

Affirmative action efforts must be specific, goal-oriented and monitored regularly to ensure that they result in increased hiring and promotions of women and minorities. In addition, recruiting and development programs should focus on increasing minority and women representation at the official and managerial levels.

4)

The Board's policy on equal employment opportunity must be implemented.

The Board's failure to implement its own policy on the reporting structure and make-up of its equal employment opportunity office is inexcusable. The Board and Reserve Banks must take immediate action to remedy this violation and comply with the Board's own policy.

5) Congress should take action to define the Board and Reserve Banks as "executive agencies" under Title VII of the Civil Rights Act of 1964.

The Equal Employment Opportunity Commission (EEOC) considers the Board an executive agency for purposes of compliance with Title VII of the Civil Rights Act of 1964. The Board has claimed that it is exempt, but states that it complies with the spirit of the law. In addition, the EEOC has taken the position that the Reserve Banks are private employers covered by the private sector provisions in Title VII rather than executive agencies covered under federal sector provisions. It is necessary for Congress to define the Board and Reserve Banks as

6)

The Board's and Reserve Banks' recruiting efforts should be expanded to include oncampus visits to predominately minority colleges and universities.

By neglecting to recruit from predominately minority colleges and universities, the Board and Reserve Banks limit, from the onset, their ability to locate qualified minority applicants for higher-level Board and Reserve Bank positions.

7) The selection process for the twelve presidents of the Federal Reserve Banks should be changed to encourage diversity.

Since 1914, when the Federal Reserve began operations, no minorities and only one woman have served as a Reserve Bank president. The Board and Reserve Banks should examine the process by which these presidents are selected and provide a new system of selection because, as far as diversity is concerned, the 80 year experience is a complete failure.