Racial, Gender Quotas in the Financial Sector?

Diana Furchtgott-Roth, Real Clear Markets, July 8, 2010

{snip} Take the Dodd-Frank financial regulation bill, for instance, which was created by merging Senate and House bills. When the Senate returns from recess one of its first actions will be to vote on the bill, which passed the House on June 30.

{snip} What did I find but Section 342, which declares that race and gender employment ratios, if not quotas, must be observed by private financial institutions that do business with the government. In a major power grab, the new law inserts race and gender quotas into America’s financial industry.

In addition to this 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. {snip}

The Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the 12 Federal Reserve regional banks, the Board of Governors of the Fed, the National Credit Union Administration, the Comptroller of the Currency, the Securities and Exchange Commission, the new Consumer Financial Protection Bureau . . . all would get their own Office of Minority and Women Inclusion.

Each office would have its own director and staff to develop policies promoting equal employment opportunities and racial, ethnic, and gender diversity of not just the agency’s workforce, but also the workforces of its contractors and sub-contractors.

{snip} The mission [of these new monitors], it [the Dodd Frank bill] says, 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.

How to define “fair” has bedeviled government administrators, university admissions officers, private employers, union shop stewards and all other supervisors since time immemorial–or at least since Congress first undertook to prohibit discrimination in employment.

{snip}

Lest there be any narrow interpretation of Congress’s intent, either by agencies or eventually by the courts, the bill specifies that the “fair” employment test shall apply to “financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants and providers of legal services.” That last would appear to rope in law firms working for financial entities.

Contracts are defined expansively as “all contracts for business and activities of an agency, at all levels, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of the assets of the agency, the making of equity investments by the agency, and the implementation by the agency of programs to address economic recovery.”

This latest attempt by Congress to dictate what “fair” employment means is likely to encourage administrators and managers, in government and in the private sector, to hire women and minorities for the sake of appearances, even if some new hires are less qualified than other applicants. The result is likely to be redundant hiring and a wasteful expansion of payroll overhead.

If the director decides that a contractor has not made a good-faith effort to include women and minorities in its workforce, he is required to contact the agency administrator and recommend that the contractor be terminated.

{snip}

With the new financial regulation law, the federal government is moving from outlawing discrimination to setting up a system of quotas. Ultimately, the only way that financial firms doing business with the government would be able to comply with the law is by showing that a certain percentage of their workforce is female or minority.

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