Financial Overhaul Provision to Promote Diversity Hiring in Federal Agencies Stirs Backlash

In this Oct. 28, 2009 file photo, Rep. Maxine Waters, D-Calif. , is seen on Capitol Hill in Washington. (AP)

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In the financial overhaul bill that is on the cusp of becoming law, House Democrats have included a largely overlooked provision that would create diversity czars to promote racial and gender hiring in federal agencies — a move that has sparked concerns about racial quotas, government waste and charges that Democrats are attempting to politicize the Federal Reserve.

The bill would establish an Office of Minority and Women Inclusion at each federal financial services agency to “ensure equal employment opportunity and the racial, ethnic and gender diversity” of the work force and senior management.

The diversity czars would also aim to “increase the participation of minority-owned and women-owned businesses in the programs and contracts” of each agency and conduct “an assessment” of those goals.

Each diversity czar would be a presidential appointee who must be confirmed by the Senate and have power “comparable to that of other senior level staff,” the bill says.

In an editorial, The Wall Street Journal accused Rep. Maxine Waters, D-Calif., author of the provision, of trying to politicize the Federal Reserve.

“The Waters provision will also give Congress and the White House a new and powerful lever to influence the operation of the 12 regional Fed banks,” the newspaper wrote. “Accusations of racial or gender indifference, much less outright bias, are politically deadly.”

“With the threat of such an accusation in their holster, the Waters czars will have enormous clout to influence Fed governance and regulatory decisions, perhaps including monetary policy,” the newspaper added.

Waters’ office did not respond to a request for comment but the lawmaker vigorously defended the provision in a letter to the editor of The Wall Street Journal, saying the newspaper’s critical editorial was “filled with misrepresentations, unsupported conclusions and outright distortions.”

“Nothing in the bill mandates lending to minorities or women,” she wrote, denying charges that the provision would politicize the Fed or allocate credit by race and gender. “The provision does not even mention lending. The offices will only be responsible for employment, management and business activities of the agencies.”

“What this legislation will do is help address an indisputable problem, the lack of diversity in financial services,” she said, arguing that studies show the “discrimination that women and minorities face compared to white men of similar educational background and age.”

Waters cited the Treasury Department where minorities make up 17.2 percent of employees at senior pay levels and a recent Government Accountability Office report that shows the lack of diversity within the financial services industry has barely improved at the management level from 1993 to 2008.

“The provision is designed to broaden and improve the work force of these agencies and expand opportunities for our nation’s small businesses – including minority-and women-owned businesses – to participate in programs and contracts instead of continuing to rely on the same ‘old boy’ network and handful of Wall Street firms responsible for the crisis in the financial markets.”

The provision remained in the legislation during a conference committee between House and Senate negotiators. The House approved the final version of the bill late last month but the Senate delayed its vote until after the July Fourth holiday.

Diana Furchtgott-Roth, an adjunct fellow at the Manhattan Institute and a senior fellow at the Hudson Institute, said the bill should be sent back to conference stripped of this provision, citing concerns about racial quotas and costs.

“The chief concern is that you’re moving from a situation where discrimination is prohibited, which is well and good and that is established law, to a situation where there are quotas in the workplace,” she told, contending that the law would extend the provisions to contractors and subcontractors – a situation that could lead to quotas in the private sector. “And those are two very, very different things.”

The law would create at least 20 new offices and up to 29 if every Treasury agency is required to create a minority office, she said.

“It would probably cost a million or over” to operate on an annual basis for each office, she said.

Furchtgott-Roth also noted that the Cabinet-level department all have similar offices in place and questioned why more is needed.

“This is a very serious concern,” she said. “We have a deficit of over a trillion dollars. Every American knows that we need to cut the deficit and not only is this a waste of money
but it implies that the existing offices we have are a waste of money.”

Race and gender employment quotas hidden in financial reform

By: Diana Furchtgott-Roth

Who would have guessed that the Dodd-Frank financial regulation bill, scheduled for a vote in the Senate when it returns from recess, imposes race and gender employment quotas on the financial industry — at a time the job market is stalling and economic growth is slowing?

Dodd-Frank’s Section 342 states that race and gender employment ratios must be observed by all government agencies that regulate the financial sector, as well as private financial institutions that do business with the government.

In addition to the bill’s well-publicized plans to establish over a dozen new financial regulatory offices, Section 342 sets up at least 20 Offices of Minority and Women Inclusion in:

>> The 10 Departmental Offices of the Department of the Treasury;

>> The Federal Deposit Insurance Corp.;

>> The Federal Housing Finance Agency;

>> The 12 Federal Reserve regional banks;

>> The Board of Governors of the Federal Reserve;

>> The National Credit Union Administration;

>> The Office of the Comptroller of the Currency;

>> The Securities and Exchange Commission; and

>> The new Consumer Financial Protection Bureau.

The director and staff of each office are tasked with promoting equal employment opportunities and racial, ethnic, and gender diversity not just in the agency’s work force, but also the work forces of its contractors and subcontractors.

The mission of these federal monitors it is to assure “to the maximum extent possible the fair inclusion” of women and minorities, individually and through businesses they own, in the activities of the agencies, including contracting.

The age-old question, of course, is what’s “fair.”

Under the U.S. Department of Education’s enforcement of Title IX, passed in 1972 as an amendment to the 1964 Civil Rights Act, which pertains to varsity athletic opportunities for male and female undergraduates, “fair” is defined as proportional. If 55 percent of the students are female, then 55 percent of the varsity sports slots have to go to women. The same might be true for financial firms.

Look at Section 342 (d), reproduced above. The “fair” employment test applies to all financial institutions, including brokers and law firms. Contracts are defined as “all contracts,” including those dealing with debt, equities and securities. Federal Reserve regional banks might have to account for race and gender when they issue credit.

Contractors that don’t make a good-faith effort to include women and minorities will be terminated.

According to American Enterprise Institute expert Christina Hoff Sommers, “This is going on everywhere. There are several bills pending in Congress such as Fulfilling the Potential of Women in Science and Engineering, the Paycheck Fairness Act, and now Section 342 of Dodd-Frank, that will empower a network of gender apparatchiks — but weaken critical national institutions.”

Section 342’s provisions will increase cost and inefficiency in federal agencies. Federal agencies will find it easier to employ and contract with less-qualified women and minorities, merely in order to avoid regulatory trouble.

Women and minorities already have a range of legal avenues to ensure that businesses don’t discriminate. By creating these new offices, Congress doesn’t believe existing law is sufficient.

Cabinet-level departments have individual Offices of Civil Rights and Diversity, and the Equal Employment Opportunity Commission and the Labor Department’s Office of Federal Contract Compliance enforce racial and gender discrimination laws.

With its new Offices of Minority and Women Inclusion, Dodd-Frank is radically changing existing law from anti-discrimination, namely equality of opportunity, to quotas, namely equality of outcome. Ultimately, the only way that financial firms will be able to comply is by showing that a certain percentage of their work force is female or minority.

A change of this magnitude in America’s employment law deserves careful consideration — rather than a few pages hidden in a financial regulation bill.