The Federal Reserve's Inspector General said on Wednesday, May 27, that it has launched a review of how the Board of Governors approves reappointments for regional Reserve Bank presidents and their first vice presidents to successive five-year terms.
In a press release, the IG said it will evaluate whether the Washington-based board's process "to approve the reappointment of Reserve Bank presidents and first vice presidents aligns with relevant Federal Reserve Administrative Manual requirements and leading practices." The watchdog added that it will also look into "the quality and completeness of executive performance evaluations and other potentially relevant information necessary to assess the merits of a reappointment."
The IG did not immediately reply to a request for comment seeking additional detail about the scope of the inquiry or why the review is being undertaken now.
Interest in how reappointments are handled has grown amid intense political scrutiny of central bank officials. The IG's announcement noted heightened attention in the wake of U.S. President Donald Trump's aggressive pressure campaign on the Fed, which some observers say could be used to seek the removal of regional officials who did not support his push for interest rate cuts.
The newly announced project is one of several oversight efforts the Inspector General is pursuing. Among those is a high-profile probe that began late last year into cost overruns tied to renovation work at the Federal Reserve's headquarters in Washington. That renovation investigation was later closed and transferred to the Fed's IG and had been a point of contention between the central bank, then-Fed chair Jerome Powell, and the Trump administration.
The IG has for some time listed a separate review focusing on how regional Federal Reserve Bank presidents and their second-in-command officers are selected in the first place. Critics of that selection process have pointed to its opacity and the limited opportunities for public comment.
The Federal Reserve System includes 12 regional Federal Reserve Banks that operate as quasi-private entities under the oversight of local boards composed of members from the private sector. Those local boards nominate and select new bank presidents, but the selections are subject to approval by the Board of Governors in Washington. Regional bank presidents play multiple roles: they contribute to the setting of monetary policy, gather and report on local economic conditions, and provide operational services to the financial sector.
Reappointments occur on a five-year cycle, a process that typically results in the incumbent remaining in place. The most recent reappointment cycle concluded late last year, when the Board of Governors unanimously approved the 11 officials who were up for renewal. The Board also reappointed Cheryl Venable as the Atlanta Fed's first vice president; she is acting as the bank's president while a successor is sought for Raphael Bostic, who retired earlier this year.
The previous reappointment cycle unfolded in the period before a trading controversy at the central bank that prompted the departures of several policymakers. The Fed faced criticism in some quarters for not identifying the relevant financial issues during the reappointment process. At that time, then-Fed Governor Lael Brainard described the review procedures as "rigorous."
The Inspector General's current review will examine both compliance with administrative requirements and the sufficiency of the documentation used to justify reappointments. The outcome of the inquiry and any potential recommendations will be part of the IG's broader oversight work concerning governance and internal controls across the Federal Reserve System.