Richmond Fed Said to Tap McKinsey's Barkin as Its PresidentBy and
Leadership pick likely to disappoint Fed diversity critics
Barkin to succeed Lacker, who was forced to resign in April
Directors at the Federal Reserve Bank of Richmond have chosen Thomas Barkin, a senior executive at global consulting firm McKinsey & Co., as the institution’s next president, said a person familiar with the decision.
Barkin also has the support of the Fed’s Board of Governors in Washington, according to the person, who asked not to be identified because they weren’t authorized to speak about it publicly. It was unclear, however, whether the Board of Governors had formally voted to approve Barkin, which is required before he can take office.
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 the chief risk officer at McKinsey, where he’s worked for 30 years, according to Steve John, a spokesman for the firm. He served as chief financial officer from 2009 to 2015. Before joining McKinsey, Barkin worked at First Boston Corp. and Boston Consulting Group, according to the company’s website.
“His primary client focus is helping financial institutions and travel and transportation companies,” according to Barkin’s McKinsey biography. He “recently supported an M&A engagement for a financial-investments firm, and contributed to a purchasing and supply-chain operations-improvement effort for an airline.”
Margaret Lewis, chairwoman of the Richmond Fed’s board, who also headed the search committee that has picked Barkin, declined through a bank spokesman, Jim Strader, to comment about the matter. None of the other five board members eligible to participate in the selection process returned phone calls and emails seeking comment.
Barkin holds a bachelor’s degree in economics, a law degree, and an MBA from Harvard University. He serves on the executive committee of the Metro Atlanta Chamber of Commerce and on the board of trustees at Emory University in Atlanta. He’s a former chairman of the Atlanta Fed’s board of directors.
Barkin, who works in McKinsey’s Atlanta office, didn’t return phone calls seeking comment.
The selection of Barkin to serve as a policy maker at the world’s most important central bank may not pass without criticism. While steeped in managerial and consulting experience, in some cases for financial firms, he has no background in monetary policy making. Nor will the decision satisfy critics who have called for more gender and racial diversity in the Fed’s leadership.
“We make better decisions when we have diverse voices around the table,” Fed Chairman-nominee Jerome Powell said during his Senate confirmation hearing last week. “That’s something we’re very committed to at the Federal Reserve, both at the Board of Governors and in the reserve banks.”
Michelle Smith, a spokeswoman for the Board of Governors in Washington, declined to comment, as did Strader at the Richmond Fed.
“To extent they were looking for more women and more people of color, Tom Barkin would not be that candidate,” said Peter Conti-Brown, Fed historian at the University of Pennsylvania’s Wharton School.
“We’re also seeing throughout the Federal Reserve system a move away from professional economists occupying positions of leadership,” he added. “You have to have professional diversity, but we’re getting dangerously close to going too far away from professional economists.”
Still, Conti-Brown said Barkin, as a financial services adviser at McKinsey, is likely to have a sophisticated understanding of banking supervision and regulation.
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.”
The activist group Fed Up, which has repeatedly called for more openness in the selection of Fed presidents, said it too 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.
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, 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 an Oct. 17 statement. “We reject the notion that our firm was involved in any acts of bribery or corruption.”
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.
Barkin, an avid golfer, is also known for his leadership roles in the United States Golf Association, where he’s a member of the executive committee and on the audit, finance and handicap committees for 2017, according to a biography on the group’s website.
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.
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 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.
Raphael Bostic was named as the head of the Atlanta Fed in March and took up his post in June, becoming the first black or Latino Fed president since the central bank’s creation in 1913. Only six women have led a regional Fed bank.
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 until he agreed to became a candidate.
Searching Since January
Documents obtained under a Freedom of Information Act request later revealed the board had offered the job to another candidate. That person, who hasn’t been identified, turned it down after being approved by the Board of Governors. Instead of offering the post to another candidate identified in the search, or restarting the process, the Philadelphia board reacted by asking Harker, then president of the University of Delaware, to step in.
Richmond’s board has been searching for a president since January, when Lacker initially announced he would retire in October. That plan was shaken up in April, when Lacker was forced to resign abruptly. In a statement, Lacker said he told federal investigators in 2015 that he’d confirmed to a Wall Street newsletter the veracity of sensitive, leaked information about the central bank’s policy deliberations in 2012. He also failed to report the breach of rules when interviewed about the leak by the Fed’s general counsel.
In December 2015 the Richmond board reappointed Lacker to a new term beginning March 1, 2016, and the reappointment was approved by the Board of Governors in Washington in February 2016.
Neither the Richmond Board nor the Board of Governors has said whether they moved forward with Lacker’s reappointment with knowledge of his actions.
(A previous version corrected the spelling of Mark Mullinix)