The Federal Reserve System has 12 regional banks, each running its own HR, finance, technology, and procurement teams. That means twelve sets of contracts and twelve back offices doing roughly the same work.
That's about to change. Fed Governor Christopher Waller announced Friday that the 12 regional Reserve Banks have agreed on a framework to centralize a chunk of those functions.
Waller called the deal "a tremendous step forward for the Federal Reserve System." The plan is about back-office work, not policy.
Functions on the list include human resources, finance, procurement, technology, payroll, and vendor management. These are the parts of running a regional bank that don't change based on where the bank is.
Under the new model, one Reserve Bank will lead each function for the whole system. That bank essentially becomes the contractor for the other 11, providing services under formal service-level agreements.
Think of it like a company moving from 12 separate IT departments to one shared IT shop with offices everywhere.
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This is where Waller drew a clear line. The plan does not move authority to Washington.
Each regional bank still keeps its independent voice at the Federal Open Market Committee, the group that sets interest rates. The number of regional banks isn't getting cut.
The geographic boundaries aren't being redrawn either. So the decentralized structure that gives presidents in Atlanta, Cleveland, and San Francisco a real say in monetary policy stays in place.
Waller has been firm that this matters for Fed independence. The setup keeps the bank's regional voices intact.
The trade-off is jobs. Waller has said that under a fuller version of the model, regional banks could end up with lower headcounts as duplicated work goes away.
He floated this in his April 21 speech at the Brookings Institution, where he first laid out the vision. The framework is the agreement, but the rollout is the hard part.
Friday's announcement is the signal that step one - getting 12 regional banks aligned - is finally done.
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