First Black Fed President Warns of Systemic Racism's Economic Toll

By Nick Timiraos

Raphael Bostic, the Federal Reserve Bank of Atlanta's president, is shining a light on how economic and social upheaval have changed how the central bank talks and thinks about racial and economic inequality.

Mr. Bostic, an economist whose work has focused on racial disparities in access to capital, has helped lead those public discussions as the first Black president to lead one of the 12 regional reserve banks in the system's 106-year history.

In an essay published after two intense weeks of national unrest following the killing of George Floyd while in police custody, Mr. Bostic framed injustice in moral and economic terms. "Systemic racism is a yoke that drags on the American economy," he wrote.

In an interview, Mr. Bostic said many of these themes getting attention now have been the subject of long-running but mostly private discussions inside the Fed.

"What changed is that a lot of the issues underlying those conversations have been laid starkly before us in a way that really makes it difficult to not talk about them," he said. "We are a different Fed in a lot of ways."

Mr. Bostic said writing the essay felt risky and that he was gratified by the response. "The Fed doesn't usually step out like that," he said.

The essay was "powerful and courageous," said Jonathan Reckford, chief executive of Habitat for Humanity International and a director of the Atlanta Fed. "Almost everyone, if they're honest, would admit it's uncomfortable to talk about these things."

The pandemic's economic and health toll has hit Black Americans and other minority groups hardest.

It has coincided with a rethink inside the Fed of how it should evaluate the impacts of its policy decisions on those at the margins instead of focusing on broad aggregates, said current and former Fed economists, including Mr. Bostic.

Lessons of the last five years are also weighing heavily on the Fed now, as it considers how to support the economy from what could be a long and difficult series of shocks. The Fed delayed and ultimately curtailed interest rate increases after a presumed pickup in inflation never materialized, even though unemployment fell to low levels that officials associated with firmer price pressures.

The Fed grew more sensitive to employment conditions than it had been "because the expansion went on long enough that the less educated and minorities started to come back" to the labor force, said Claudia Sahm, a former Fed economist.

In three years at the Atlanta Fed, Mr. Bostic has put particular emphasis on economic resilience and the hurdles poor Americans face in becoming upwardly mobile because of high housing costs in the nation's most prosperous cities.

"Those issues being fought over in our streets right now have been front and center for him his whole career," said Shaun Donovan, a Harvard classmate. As President Obama's housing secretary, he recruited Mr. Bostic to a top post at the Department of Housing and Urban Development in 2009.

As an undergraduate, Mr. Bostic initially planned to study to become a chemical engineer before majoring in psychology and economics. Mr. Bostic, who is 54 and was raised in Delran, N.J., by Caribbean immigrants, said he was initially drawn to studying how people make decisions and later how urban places grow.

"Access to capital is really important for minority communities, and the evidence is pretty clear minority communities don't have that access," said Mr. Bostic.

He joined the Fed in 1995 as an economist after completing his economics Ph.D. at Stanford University. First as a researcher and later as a policy maker, he has shaped how federal agencies interpret two major pieces of legislation -- the Fair Housing Act of 1968 and the Community Reinvestment Act of 1977.

Mr. Bostic initially declined to be considered by the Obama administration when they approached him about being nominated to the Fed's seven-member board last decade. At the time, he had already been commuting between Washington and his home outside Los Angeles, where he lived with his longtime partner and now husband.

The job as president was more appealing, although it almost didn't materialize. In 2016, Mr. Powell was a Fed governor who served as the central bank's liaison with the reserve banks. He and Fed Chairwoman Janet Yellen had pressed the committee searching for the Atlanta Fed's next president to find well-qualified minority candidates for the top job, according to people familiar with the search.

The Fed was under pressure from Congress to diversify its senior ranks, and Mr. Powell and Ms. Yellen believed the lack of diversity reflected poorly on the Fed, these people said.

The Atlanta search committee drew from private-sector and nonprofit executives who serve as directors at the bank. They were close to naming a different minority candidate for the job when financial disclosure problems forced the committee to start over, according to people familiar with the matter. At that point, Ms. Yellen recommended that the committee reach out to gauge whether Mr. Bostic, whom she knew from prior work, would want to apply for the job.

"What really impressed the committee with Raphael is his ability to translate the theoretical in very practical terms," said Mr. Reckford, who declined to discuss details related to the search.

He said Mr. Bostic carries an "unfair burden" by being the first Black president of a Fed bank. "You are going to speak for African-Americans and the LGBTQ community, and that's not fair," he said. "But it is also true that he has a credibility to speak from his personal experience that I hope influences the broader Fed, and has a ripple beyond the Fed."

Mr. Bostic said his position doesn't insulate him from the racial profiling one encounters as a Black man in America, including being stopped by the police while minding his own business.

"I don't think there's an African-American male in the country who would answer no to that question," he said. "If I was going to dwell on that, I wouldn't have time to dwell on anything else because it's there, all the time."

The Atlanta Fed district comprises Alabama, Florida, Georgia and parts of Louisiana, Mississippi and Tennessee, an area that has sizable minority populations.

Staff at the bank who accompany the Fed leader across smaller cities and towns in district say that "going around with Raphael is like following a rock star," said Dennis Lockhart, Mr. Bostic's predecessor.

While Mr. Bostic says his career has felt like a succession of different "firsts," the Fed post is the first time his achievements or position has reached "people that I've never met." He's often stopped after a speech or public engagement by well-wishers who want to tell him how excited they are by his accomplishments. Getting to see how happy that makes people is a "privilege," he says, "in a world that is oftentimes tough and hard."

For his 25-year class reunion in 2012, Mr. Bostic's Harvard classmates -- which included three Obama administration cabinet secretaries -- elected him marshal, a sign of his high regard. "I didn't know anybody else that had so many friends in our class, and so many friends across different groups," said Mr. Donovan.

Fed officials have said they are working hard to address a lack of diversity in their ranks, including perceived hostility to minorities and women in the economics profession more broadly. A staff and leadership that better reflects the nation will limit the potential for blind spots in any of the Fed's assessments, they say.

As an example, Mr. Bostic pointed to his study of the impact of stress on decision-making. Because poor people are stressed more often than others, "it shouldn't be surprising that their decision-making suffers," said Mr. Bostic. "That reality does not penetrate as much as it should" in policy-making circles, leading to policy choices that rely on flawed assumptions, he said.

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