Federal Reserve Board: H.2 Release for Week Ending November 4, 2017; H.4.1 Release (Balance Sheet) for Week Ending November 9, 2017; Three Of Note Items

Of Note

(1) Employment-related cases filed against the Board.

Active cases

Handy v. Board of Governors, No. 17-cv-274 (E.D. Va., filed May 4, 2017). Employment claim.

Mitchell v. Yellen, No. 17-182 (D.D.C., filed January 27, 2017). Employment discrimination case.

Hardy v. Yellen, No. 16-1572 (D.D.C., filed August 2, 2016). Employment discrimination claim.

Richardson v. Board of Governors et al., No. 16-cv-00867 (D.D.C., filed May 9, 2016). Claims arising out of termination of employment.

Richardson v. Board of Governors, No. 14-cv-01673 (D.D.C., filed October 8, 2014). Employment discrimination claim.

Burford v. Yellen, No. 15-cv-02074 (D.D.C., filed December 1, 2015). Employment discrimination claim.

Case concluded

Artis v. Greenspan, No. 15-5260 (D.C. Cir., notice of appeal filed September 19, 2015). Appeal of dismissal of plaintiffs’ Equal Employment Opportunity claims. On December 21, 2015, the Court of Appeals summarily affirmed the district court’s dismissal. On October 3, 2016, the Supreme Court denied plaintiffs’ petition for certiorari (No. 15-1543).

[Author’s note: This case has been the subject of several blog posts.]

(2) Dick Grote’s “rank-and-yank” procedure challenged in a court case against Uber Technologies Inc. as discriminatory towards women. (See Bloomberg article.)

(3) Oligarchy admission? Stephen Cloobeck, millionaire, and political donor stated on cable network MSNBC that he told Democratic Party leaders in Congress that if the party moves too far left “he’s out” (in other words, he will not donate to the party).


In other news, Cloobeck stated on Twitter that he will no longer endorse Sen. Dean Heller (R-Nev.).

“Free-market” result

Comment:  It is time for money to get out of politics.

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending October 28, 2017, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Bank Holding Companies First Horizon National Corporation, Memphis, Tennessee — to merge with Capital Bank Financial Corp., Charlotte, North Carolina, and thereby indirectly acquire Capital Bank Corp., Raleigh.

-Approved, October 29, 2017


Southside Bancshares, Inc., Tyler, Texas — to merge with Diboll State Bancshares, Inc., Diboll, and thereby indirectly acquire First Bank & Trust East Texas.
-Approved, October 29, 2017


Enforcement Liberty Shares, Inc. (now Heritage Bancorporation, Inc.), Hinesville, Georgia — written agreement issued May 9, 2011, terminated October 23, 2017.

-Announced, October 31, 2017



Wayne Bank and Trust Company, Cambridge City, Indiana — issuance of a consent order of assessment of a civil money penalty.
-Announced, November 2, 2017


Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for November 9, 2017, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of November 8, 2017):  $4,505,435 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)



Rank and Yank / Forced Distribution–Dick Grote: Giving Advice on Bad Reviews—Agree with Poor Rating

[Note:  This blog has covered Dick Grote’s wicked “rank and yank” program previously.]

Dick Grote has authored another article on “rank and yank,” “What to do when you think your performance review is wrong” (published in the Harvard Business Review (March 7, 2017)). This time the defense of the system is indirect—informing the recipient of a “C-Bucket” rating to accept it. Indeed, as Grote states in the article, nothing the employee argues against the rating is likely to change it.

Indeed that is true in the rank and yank process. The decision made in the calibration meeting for managers is final. Those in the C-Bucket receive negative ratings in order to convince them to quit.

Bucket (rank)

Percentage [“vitality curve”] (amounts can be adjusted)




Lavish rewards, encouragement



Little to paltry increase



Pressure to quit, firing

Because of the calibration meeting, where managers rank employees, changing a rating means changing it for others, given that rank and yank is a rigid, inhuman, and employee-abusive system.

Artist: Michael Sloan

A key Grote quote:

“But what if a company’s forced ranking procedure, honestly and objectively done, reveals that the blacks or women or disabled employees just aren’t as talented as the white ones? Should they do what some Harvard professors are said to do and award A’s to all the blacks, just to keep them from squawking?” (Grote, page 4 (a quote from a previous post). (Note: Consider this statement from Grote with the ever-present and persistent legacy of slavery and Jim Crow subjugation in the United States of America.)

Grote offers three options for an employee facing an unacceptable performance rating:

  • Accept the rating (Grote preferred).
  • Disagree with the rating (Grote disfavored this option because the manager is invested in the rating, errors look bad on the manager (rather interesting an aggrieved employee must defend unacceptable management behavior, while the employee is expected to satisfy any whim of the manager).
  • Quit (Grote advises for people who get c-bucket ratings to go on a “decision-making” leave to decide either to attempt to fulfill the impossible to meet expectations or quit. The resignation of the employee is the ultimate goal.)

While Grote thinks managers should be given absolute authority in performance appraisal, the personnel record is the property of the employee. The employee has the right to state what is allowed in that property; hence, the reason why employees must sign reviews. The company merely has possession of the employee’s property—the contents of the file.


Federal Reserve Board: H.2 Release for Week Ending June 10, 2017; H.4.1 Release (Balance Sheet) for Week Ending June 15, 2017; Four Of Note Items

Of Note–

(1) The plight of the long-term unemployed (out of work longer than a mere six months) continues. A Bloomberg article implies that the issue is focused on the formerly incarcerated, the disabled, and those who have been, or are, addicted to drugs.

[No description of programs to assist people to return to work was included in the article.]

The disconcerting title of a Money magazine article speaks volumes (although it implies the unemployed are to blame for their plight): “Unemployment is Really Low. So Why Can’t These People Find Jobs?

(2) Kansas and the failure of the so-called Laffer Curve (aka Voodoo Economics).

(3) Institute for New Economic Thinking, “The Hidden Cost of Privatization.”

(4) The New York Times. “The Decline of the Baronial CEO.” Cutthroat forced distribution (or “rank and yank”) encouraged by CEO’s on powerless employees have ultimately reached the C-Level. (Although CEOs are well compensated, unlike employees, in their “exit” packages.)

Artist: michael sloan

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending June 3, 2017, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Bank Holding Companies Canadian Imperial Bank of Commerce, Toronto, Canada, and CIBC Holdco Inc., New York, New York — to acquire PrivateBancorp, Inc., Chicago, Illinois, and thereby indirectly acquire The PrivateBank and Trust Company.

-Approved, June 6, 2017

Forms Forms — initial Board review to extend with revision the Capital Assessments and Stress Testing information collection (FR Y-14A/Q/M).

-Proposed, June 6, 2017

Personnel Division of Supervision and Regulation — appointment of Mary Aiken as senior associate director.

-Announced, June 5, 2017

Savings and Loan Holding Companies TIAA Board of Overseers, New York, New York; Teachers Insurance and Annuity Association of America; and TCT Holdings, Inc. — to acquire EverBank Financial Corp, Jacksonville, Florida, and thereby indirectly acquire EverBank, a federal savings association.

-Approved, June 6, 2017

Enforcement EverBank Financial Corp, Jacksonville, Florida — issuance of a consent order of assessment of a civil money penalty against EverBank Financial Corp for mortgage servicing deficiencies, and termination of a related enforcement action issued in April 2011.

-Approved, June 8, 2017


Regions Bank, Birmingham, Alabama — issuance of consent orders of prohibition against Richard Alan Henderson and Philip Henry Cooper, both former employees and institution-affiliated parties.

-Announced, June 7, 2017

Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for June 15, 2017, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of June 14, 2017):  $4,522,637 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)

Federal Reserve Board: Board Issued 2017 Office of Minority and Women Inclusion Report. Slightly More Clarifying Information Included; Potential Improvement Obscured by Lack of Explanation

In March 2017, the Federal Reserve Board (Board) posted the 2017 version of its Office of Minority and Women Inclusion (OMWI). As discussed previously in this blog, there had been some attention in inclusion issues by the Congress and the Board’s Office of Inspector General (IG). The blog had covered these developments, and also a former long-running case (not mentioned by the OMWI report), Artis v. Greenspan Bernanke Yellen.

Overall, with this report, the reader is made to feel skeptical of all Board activities, even if true progress is being made. More explanation of the programs being performed with the money of United States citizens, and the elimination of obscurity,  is expected and required.

Federal Reserve Board, Office of Minority and Women Inclusion,
Reports to Congress

(Preface language for report submitted in 2015.) “Pursuant to section 342(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Office of Diversity and Inclusion (ODI) of the Board of Governors of the Federal Reserve System must submit an annual report to the Congress outlining the activities, successes, and challenges of the office. This is the office’s report for calendar year 2014. Sheila Clark serves as the director of ODI.”

Year Link
2012 http://www.federalreserve.gov/publications/minority-women-inclusion/2012-omwi-preface.htm
2013 http://www.federalreserve.gov/publications/minority-women-inclusion/2013-omwi-preface.htm
2014 http://www.federalreserve.gov/publications/minority-women-inclusion/2014-omwi-preface.htm
2015 http://www.federalreserve.gov/publications/minority-women-inclusion/2015-omwi-preface.htm
2016 http://www.federalreserve.gov/publications/minority-women-inclusion/files/omwi-report-20160331.pdf
2017 https://www.federalreserve.gov/publications/files/omwi-report-20170331.pdf

Sheila Clark’s letter to the EEOC (printed in the Auerbach book, page 123).

In reading the 2017 OMWI report, the report has essentially the same content and structure as in 2016; however, there were some additions. The additions are concerning as they allow worrying questions about the Board’s seriousness to this important issue, given its history in this area.

  • The creation of a Diversity and Inclusion Strategic Plan. (The document seems like a condensed OMWI Report. The issue is the obscurity of Board actions, which is worrisome and makes an observer doubt the organization’s sincerity in improving its failings.)
  • Divisions provide the Board’s Office of Diversity and Inclusion with periodic reports through a Diversity and Inclusion Scorecard. (Again, a description of this scorecard is not in the report, leading to concern about sincerity.)
  • The positions filled in 2015 and 2016 evidence a somewhat similar rate of new hires, 17.1 percent and 16.2 percent, respectively. (See chart below.) The numbers suggest somewhat consistent turnover, leading to the possibility of the existence of a “rank-and-yank” system.
  • The addition of courses to its core professional development curriculum–
    • “Unconscious Bias”
    • “Generational Differences”
    • “Inclusive Leadership.”

(It is unclear whether these courses are merely offered or are required for employees to attend. And, what will be ODI’s oversight responsibility to make sure things stay on track or that the courses prove effective? Again, there is nothing mentioned in the report.)

  • In 2016, the Board created targeted strategies to address low participation of African Americans and Hispanics in research positions. (Unclear what these strategies are.)
  • In April 2016, there was a creation of a Diversity and Economic Inclusion Initiative and a creation of a workgroup, of which the OMWI Director is a member. (The report did not provide any description of these programs.)
Board Hiring and Promotions, 2015 and 2016
2015 2016
Positions filled 576 576
Interns 118 127
Positions filled w/ counting interns 458 449
Total number of Board employees 2673 2766
Percentage (new non-intern hires over total number of employees) 17.1% 16.2%

Given the issues presented by the IG previously and with the long running time of the now-ended Artis v. Greenspan Bernanke Yellen case, the Board’s activities with regard to diversity and inclusion continues to remain an issue of moderate to grave concern until demonstrable, sustained and consistent improvement is shown. Meetings, scorecards, and reports are a start, but insufficient compared to firm results.

In addition, the Board’s use of rank and yank undermines and destroys all efforts described in this post. The fourth full paragraph, left column on page 7 was used in previous years. [Note: The blog had identified that rank and yank is potentially being used at the Board.]

Artist: Michael Sloan

In all the tables in the “Equal Employment of Minorities and Women,” the delineation of non-minority and minority is obscure, specifically the minority category. Such obscurity can hide issues with specific subgroups under the umbrella of minority.


Harvard Business Review and Dick Grote: A Management Consultant that Loves the Process of Termination, Dehumanizing Human Employees; Review of Grote’s Article– “A Step-by-Step Guide to Firing Someone”

Grote, Dick (2016). “A Step-by-Step Guide to Firing Someone.” Harvard Business Review. February 17.

Artist: michael sloan

Harvard Business Review has published another article on mass termination, specifically this document of Dick Grote, “A Step-by-Step Guide to Firing Someone.”

The writing is not different from the theme of his writings: that organizations should rank employees into A, B, and C buckets and humiliate, dehumanize, and fire those placed in the C bucket (see Grote’s quote , below, for an example).



Percentage (amounts can be adjusted) Effect
A 20 Lavish rewards, encouragement
B 70 Little to paltry increase
C (aka slackers, slouches, losers, ne’er-do-wells) 10 Pressure to quit or firing

The report is like a recipe of planning destruction in an organized way (creating a transition plan; checking that the employee is not fired on a birthday, shortly before a pension is vested, and so on) making it seem normal, but the effect of the employee losing his or her livelihood and income stream is notably absent.

The immoral notion that human beings can be acquired, used up, demeaned, and then thrown away pervades the report. The notion that management persons are perfect by virtue of their position alone is illogical.

Here is an example of the mindset of Grote that informs his “advice” to disregard an employee’s humanity (and how he can discern what other people feel about his stealthy firing tactics always mystifies me; his pawns example people always agree with him (!)):

Actually, when slackers and slouches are finally fired, managers usually discover that coworkers are relieved. Their peers are the ones who have had to work harder to make up for their shortcomings and slacking off. When terminations are well justified and professionally executed, the rest of the work group realizes that this is a good place to work.

But when obvious losers and occupational ne’er-do-wells are allowed to continue in their positions unchallenged, the message to the talented and energetic is that this is a place to avoid. Those who can find other jobs leave; the ones who stay are those who prefer an employer with low standards.

A final note: The most common problem with terminations is that they don’t happen as fast as they should. Once the decision has been made to pull the plug and start over, don’t dillydally in the misguided hope that — somehow — things may still work out. They never do. Remember: It’s not the people you fire who make your life miserable. It’s the ones you don’t.

Organizations using any procedure promoted by Grote must be aware of his pedigree and the organizational failures that have resulted from using forced ranking (notably the former Enron but also other organizations covered in this blog, the Federal Reserve Board, Amazon, Microsoft, Vanguard, Mount St. Mary’s University, Yahoo).



General Accountability Office: The So-Called Performance Audit Is a Weak Analytical Tool; Continued Use Is Offensive to the Taxpayer

The General Accountability Office (GAO), one of the legislative agencies, produces so-called performance audit reports on governmental operations. If these reviews were limited to the strengths of accountants and auditors–financial statements and financial records–the agency would do well.

When accountants and auditors venture into non-financial operations and dare to offer opinions through so-called performance audits, the weakness of the agency is made manifest. This weakness leads to damaging, reckless, and information-free yet jargon-filled reports. (Note: I have found similar results with some reports of some Inspectors General offices.)

Performance audits evaluate evidence against stated criteria, such as specific requirements, measures, or defined business practices. This definition of performance auditing is consistent with international auditing standards.

The Washington Post published two exasperating columns based on this flimsy GAO report, GAO-16-520R, Federal Workforce: Distribution of Performance Ratings Across the Federal Government, 2013.

The GAO report writers stated on page 1 and 2 that Senator Ron Johnson (R-Wisc.) asked the GAO to review the performance management systems across the 24 Chief Financial Officer Act agencies. (See Pub. Law. 101-576, sec. 5.) The GAO’s “review” approach was to complete a performance audit listing the results of the implementation of the agencies’ performance management systems, specifically how many employees got each rank level.


This methodology made the resulting report useless, uninformative, and damaging to civil service employees burdened with unfair ratings, managers, agencies or any combination of the previous three factors. Notably, the report failed to do the following, at a minimum:

  • The structure of each of the agencies’ programs were not reviewed.
  • The evaluation as to how the agencies programs satisfied the merit principles was not done.
  • The academic research reviewing performance management is nowhere in the report.

The agency goes through great effort to support the status quo and uses only its own research to support its findings. This error is produced by the myopic methodology for the report.

The methodology is the most important part of any GAO report as it governs the method that the report would be put together. However, it also is the greatest weakness of the report as it excludes any finding that does not fit the methodology. As a result, GAO performance audit reports are not truly investigatory but rather a fancy way of self-congratulating the report writers’ “intelligence”.

The painful side effect of such a limited “review” is that civil servants who suffer unfairness are ill-served by such a report. An example is the painful, waste-of-human-resources manner that the Federal Reserve Board (Board) (not a CFO Act agency, but its operations serve as an example) does its performance management system, the so-called PMP.

The Board, using “rank and yank” policies fires a percentage of staff every year through targeting some employees with low ratings. Such low ratings place these employees on a list to be fired. Before losing the position, the target is offered a settlement agreement, in which severance is offered and, most importantly, the low rating is raised to satisfactory level. In exchange, the target is asked to release the agency from any legal claims of liability.

In this way, the Board can publish numbers showing that all employees got satisfactory or above ratings, while simultaneously covering up its firings.

Thus, the weakness of the GAO’s performance audit method is demonstrated with these facts from the Board, and shows the GAO as an impotent, insular, ineffective, and insulting-to-the-conscience agency when it does work in the performance management area.

I continue to be unimpressed and disgusted with the GAO; I will not give credibility to any of its work unless serious improvements are made in its reporting operations. Namely, extensive research and analytical work product that considers all facts and possibilities, not just proving an insular hypothesis.


Labor Market Fluidity: Many Proposals to Try to Explain it; None are Conclusive. Rank and Yank, However, Focuses on Persistent Workforce Displacement and Has Destructive Effects

Malloy, Raven; Smith, Christopher L.; Trezzi, Riccardo; Wozniak, Abigail (2016). “Understanding Declining Fluidity in the U.S. Labor Market.” Working Paper. Brookings Papers on Economic Activity. BPEA Conference Draft. March 10-11.

The paper presented ideas to achieve two goals–(1) determine whether various measures of labor market fluidity are related and (2) determine more completely when declines in fluidity began. The authors discussed a number of possibilities, but suggested more work to be done for most of them as the current work did not present clear answers. The authors stated that they found some relationship between a decline in social capital (trust of strangers) and a larger decline of labor market fluidity. The authors acknowledged more work is needed to explore even this relationship.

In reading the paper, I was struck by the attempt to explain human behavior in economic terms only. The paper would be stronger still if other social science disciplines were invited to explore these issues. All of the questions seems to have been proposed by economists, but the questions themselves involve sociology, political science, psychology, and maybe social work. Proper analysis would require involvement of these disciplines in order to make a proper contribution to policy.

Moreover, expectation of labor market fluidity can lead to bad policy, such as “rank and yank” programs, promoted by Dick Grote. Rank and yank forces a certain amount of turnover every year. In every case, such a broad brush approach has produced destruction. This result shows the danger of thoughtless consideration of policy implementation. This result could be reduced with thoughtful and full evaluation of social policy.

[Note: This paper was also summarized at Bloomberg Business.]