Waller urges 'System first' mindset for Fed operations

Waller proposed centralizing and standardizing back-office functions such as information technology, human resources, financial management, enterprise risk management, and payments across the Federal Reserve System.

He argued that while these services are essential for each Reserve Bank, there is no rationale for them to be provided in 12 different ways.

This standardization would lead to lower operating costs, better overall risk management, and consistent service delivery, ultimately benefiting taxpayers and supporting the Fed's commitment to wisely use public resources.

In contrast, functions unique to each District, such as monetary policy voting, research, community outreach, community development, supervision, and discount window operations, should remain locally run.

Addressing concerns that his proposal might undermine the Federal Reserve's decentralized design, Waller clarified that the framework preserves regionalism and operational independence.

The 12 Reserve Banks were designed to carry out most non-monetary policy functions with Board oversight, making largely independent decisions on operations.

The new framework allows Reserve Banks to make independent decisions as a collective group, rather than bank-by-bank.

While the Board maintains oversight, day-to-day control remains with the Reserve Banks.

Functions like human resources will be centrally led by a single Reserve Bank acting as a 'contractor,' ensuring accountability and cost-efficiency while distributing key responsibilities across the System consistent with local expertise.