Federal Reserve Speeches·Apr 21, 2026, 2:30 PM ET

Waller, Modernizing Federal Reserve Operations in the 21st Century

The Federal Reserve operates as a decentralized system of 12 regional Reserve Banks with approximately 20,000 employees, yet its operational structure requires modernization to reduce costs & manage risks.
Historically, Reserve Banks focused on local activities such as check processing, cash distribution, & local economic analysis, but technological advances & regulatory changes have shifted the economy toward national operations.
Key operational areas like payments, IT infrastructure, & fiscal agency for the Treasury have already moved toward centralization to achieve economies of scale & efficiency.
Activities requiring local expertise, such as regional economic research, community engagement, & bank supervision, should remain District-based, whereas support functions like HR, finance, procurement, & IT should be standardized nationally.
The speaker identifies three drivers for accelerated change: faster technology cycles including AI, the need to compete for national talent, & the necessity to benchmark against private-sector efficiency.
Two models for future operational modernization are proposed: Model 1 involves standardizing support functions under single System leaders while keeping physical footprints intact, while Model 2 adds physical consolidation of non-local functions into fewer centers.
Model 2 is presented as the ultimate destination to maximize cost savings, cybersecurity, & resilience, though it may result in reduced employment at some Reserve Banks.
Implementing these models requires a shift from consensus-based decision-making to genuine delegation of authority, allowing System leaders to act without needing agreement from all 12 Districts.
The core argument is that while decentralization is vital for monetary policy & regional representation, operational fragmentation must end to ensure the Federal Reserve delivers value to the American taxpayer.