A little-noticed provision of the new Wall Street reform law will push for more diversity in the financial sector. Some think this is necessary because mostly white males regulated and ran the big banking companies that led us into the worst recession in 70 years — and still hold most of the best financial jobs.
While discrimination is against the law, government-mandated diversity can conflict with businesses’ ability to hire the most qualified candidates. As this provision is implemented, this balance shouldn’t be tipped.
Section 342 of the massive new law requires various government financial agencies to “ensure, to the maximum extent possible, the fair inclusion and utilization” of minorities and women “at all levels” in the financial services industry.
The important words are “at all levels.” A report this May by the Government Accountability Office showed little change in overall racial and gender diversity in the financial sector in a 15-year period and concluded that “diversity in senior positions remains limited.”
Advocates see the new provision as an overdue move to bring more women and minorities into management positions in the industry. Opposition appeared in a July 8 article in Real Clear Markets. Diana Furchtgott-Roth, an economics columnist, called it a “major power grab” to install race and gender quotas in America’s financial industry. She declared that women and minorities already have ample legal protection against discrimination.
Maine’s Susan Collins, one of three Republican senators to vote for the overall financial reform bill, expressed concern, through her spokesman, “that the language in this bill could create yet another (and needless) bureaucracy for women and minority-owned businesses that are trying to do business with the federal government.”
Republican members of the U.S. Commission on Civil Rights also expressed opposition. That commission should rightfully be a place to turn to if some woman or minority member encounters discrimination in employment or a contract bid. But the commission, sometimes called a “civil rights watchdog,” has in recent years seemed less interested in discrimination against women and minorities than in so-called “reverse discrimination” against white males.
Under the new provision, at least 20 new Offices of Minority and Women Inclusion, are to be created in the Treasury Department, Federal Reserve, Securities and Exchange Commission and other agencies involved with finance. They can require fair practices in “services of any kind” by investment firms, mortgage banking firms, asset management firms, brokers, dealers, underwriters, accountants, consultants and law firms. They may require contractors to certify that their work forces have a “fair inclusion” of women and minorities.
While well-intentioned, this sounds like a lot of bureaucracy based on vague standards. How well it works in practice will depend on how the rules are written and how they are carried out.