Is John C. Williams, president of the Federal Reserve Bank of San Francisco, failing up?

Better Markets, a non-profit organization that advocates for the public interest on Wall Street, says a potential promotion by Williams to lead the Federal Reserve Bank of New York would reward failure - because the San Francisco Fed failed to prevent widespread customer abuses at San Francisco-based banking behemoth Wells Fargo & Co. (WFC - Get Report) , which it's supposed to supervise. He made the comments after the Wall Street Journal reported that Williams, 55, is the New York Fed's top pick to replace retiring President Bill Dudley.

The New York Fed branch is the biggest in the country, accounting for about $2.5 trillion, or 56%, of the Federal Reserve System's total assets at the end of 2017. The San Francisco Fed, by comparison, had $568.7 billion of assets. The New York Fed plays key roles in the oversight and management of U.S. payment systems and money markets, and it houses the nation's main gold vault. And the New York Fed president has a permanent seat on the Federal Reserve's interest-rate-setting committee, whereas heads of the other regional branches have to share rotating seats. 

Kelleher's comments are pertinent because the New York Fed also supervises the big Wall Street banks JPMorgan Chase & Co. (JPM - Get Report) , Citigroup Inc. (C - Get Report) , Goldman Sachs Group Inc. (GS - Get Report) and Morgan Stanley (MS - Get Report) , in addition to the key New York operations of foreign banks like Germany's Deutsche Bank AG (DB - Get Report) , Switzerland's UBS AG (UBS - Get Report) and the U.K.'s Barclays Plc (BCS) . These firms were at the heart of the financial crisis of 2008, during which the global banking system nearly collapsed.

"After being AWOL and failing to stop Wells Fargo's decade-long illegal conduct, the President of the San Francisco Fed should not be promoted to be president of the most important regional office in the entire Federal Reserve System," Better Markets President Dennis Kelleher said in a statement. "That would reward failure and send the wrong message to the biggest banks in the country that the Fed really does not take supervision seriously."

Spokesmen for the San Francisco Fed and New York Fed declined to comment.

Sara Horowitz and Glenn Hutchins, co-heads of the search committee for the next New York Fed president, said last week in a statement that they had narrowed the list of candidates to a "handful." The final choice must be approved by the Federal Reserve Board of Governors. 

Williams took over the San Francisco Fed in 2011, just as Wells Fargo, by its own admission, was ramping up pressure on employees to aggressively cross-sell banking products to customers, and millions of unauthorized accounts were opened to meet exacting sales targets. The bank didn't face sanctions over the matter until 2016, when the U.S. Consumer Financial Protection Bureau, Office of the Comptroller of the Currency and the City and County of Los Angeles imposed $185 million in fines.

In February, the Federal Reserve Board in Washington imposed an unprecedented ban on further asset growth at Wells Fargo until Wells Fargo improves board oversight and risk management.

Williams joined the San Francisco Fed in 2002 as director of research, according to the bank branch's website. Previously he was an economist with the Federal Reserve Board of Governors.  

According to Better Markets, the San Francisco Fed has hundreds of staff assigned to supervise Wells Fargo on a daily basis.

"The San Francisco Fed either did not know this was happening under its nose or knew but did nothing to stop it," Kelleher said in the statement. "That alone should be a disqualification for any promotion, but it is compounded by the fact that there has been no accountability for anyone at the San Francisco Fed or public disclosure of how such an egregious failure of supervision and regulation could happen or last for so long."

He also called for a "full public airing of the secretive and flawed process at the New York Fed that resulted in the recommendation to reward such failure."

The choice of Williams, who is a white man, also may disappoint observers who had advocated for a woman or minority candidate to fill the New York Fed role. 

The search committee, in presentations on the New York Fed's website, had touted efforts to find qualified women and minority candidates. 

In last week's statement, Horowitz and Hutchins reiterated that they were "committed identifying a diverse slate of potential candidates and interviewing a range of candidates reflecting the diversity of the qualified candidate pool," and that interest in the job has come from people with "demographic and gender diversity."