Federal Reserve Governor Christopher Waller has called for reforms to the U.S. central bank's operations, proposing that key functions should be centrally managed to reduce reliance on consensus-building among the 12 regional Federal Reserve Banks. Decisions concerning human resources management, information technology architecture, procurement strategies, and facility standards should be made at a system-wide level rather than individually by each region, Waller stated in remarks prepared for a Tuesday event at the Brookings Institution in Washington. He emphasized that this shift requires not just authorization but a genuine move away from a consensus-based approach to operational decision-making. These comments come during a transitional period for the Fed. The term of Chair Jerome Powell is set to conclude next month. Kevin Warsh, nominated by President Donald Trump to succeed Powell, has also argued for comprehensive changes, including during his Senate confirmation hearing earlier on Tuesday. Waller, who currently leads a committee at the Fed's Board of Governors that oversees the regional Feds, outlined two potential models for streamlining operations. The first model involves a single official managing major support functions for the entire Federal Reserve System, while the physical footprint of the regional banks remains largely unchanged. The second model goes further, he said, by physically consolidating functions that do not require a local presence into a few operational centers located in cities with lower costs or advantages in skilled labor. "It is important to be clear: the first is a transitional path, not the end goal. The full benefits in terms of cost, resilience, cybersecurity, and talent will likely only be realized under the second option," Waller stated. He acknowledged that this could mean a future reduction in staffing levels at the regional Fed banks. The Fed Governor explained that adjustments to the central bank's operations are necessary because, over time, the geographic specificity of the economy, the banking system, and many of the regional Feds' responsibilities has diminished. He also cited rapidly advancing and potentially disruptive technologies, such as artificial intelligence. "The current pace of technological change means the Fed no longer has the luxury of sitting back and repeatedly deliberating on changes," Waller said. "If we are to ride this wave rather than be swamped by it, we need greater flexibility to improve efficiency and manage risks like cybersecurity and the integration of AI into our system's processes."
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