FRB Governor Says Fed Operations Are Outdated

Federal Reserve Board Governor Christopher J. Waller argued that the Fed's operational structure is overdue for fundamental change, and that it must centralize functions that no longer require a regional presence.

In remarks at the Brookings Institution, Mr. Waller said that the regional system was designed for an era when banking was local. He asserted that functions like HR, payroll, procurement, and IT have no meaningful reason to be run 12 separate ways. He said that by private-sector benchmarking, the resulting redundancy has left the Fed materially behind on cost and efficiency - particularly in technology spending. He argued that three forces make the status quo untenable: (i) AI and accelerating technology cycles demand agility the Fed does not currently have; (ii) national talent markets put a fragmented structure at a competitive disadvantage in hiring; and (iii) the gap between the Fed's operating costs and private-sector norms is too large to ignore.

Mr. Waller recommended that support functions be consolidated under single System-wide leaders with real authority, concentrated in fewer operations centers, and outsourced where the economics warrant it. He said the Fed's tradition of consensus-based decision-making - valuable in monetary policy - becomes a liability in operations, but made clear that regional reserve banks should retain their voice on monetary policy, their supervision of local banks, and their role engaging the communities they serve. He said the Fed's decentralized character remains a genuine strength — but only where regional differentiation actually adds value.