BLOG VIEW: Last week, the Federal Reserve announced that it had established offices to ‘promote diversity and inclusion at the Federal Reserve Board and at all 12 of the Federal Reserve Banks.’ This might seem very odd, since the Fed doesn't have a reputation for being a racist or sexist organization. However, this action is being forced upon the Fed by one of the more unfortunate aspects of the Dodd-Frank Act.
Buried somewhere in the 2,300-page Dodd-Frank legislation is the requirement that the federal banking and securities regulatory agencies create their own Office of Minority and Women Inclusion, which will address employment and diversity matters within the financial services industry. The idea that the financial services industry is lacking diversity is utterly laughable – 20 years ago, when I was on the staff of the American Bankers Association's monthly magazine, I interviewed many bank presidents and senior officers in major financial services institutions who were not white men. At the time, I was genuinely impressed at the industry's demographic diversity of leadership – two decades later, the situation has gotten better, not worse.
In announcing its new inclusion office, the Fed promised that this endeavor mirrors its ‘long-standing efforts to promote equal employment opportunity and diversity’ while continuing to ‘work to foster diversity in procurement, with a focus on minority-owned and women-owned businesses.’ The fact that these issues played no role whatsoever in the tumult that resulted in the Dodd-Frank Act seems lost on the Fed – and everyone else in Washington, for that matter. It also creates new problems at multiple levels.
The most obvious problem is what it brings about: additional bureaucracy at a time when the federal government is buried under paperwork and hemorrhaging red ink, more activity being invested in an area that does not require detailed attention and the perpetuation of an antiquated political response that was required to address the dramatic social changes of 40 years ago but is completely irrelevant today.
Even worse are the dangerous situations that the new office ignores: the financial difficulties facing the nation's minority- and women-owned financial institutions, the housing finance-related problems that continue to plague predominantly African American and Latino neighborhoods and the never-addressed concerns raised by multiple data sources that showed a disproportionate volume of toxic subprime mortgages were issued to non-white borrowers.
But if you pretend those problems did not exist, it is impossible to absorb the notion that minorities and women are ill-represented within the federal structure. In case anyone has forgotten, the president is African American, the person in charge of building the most dramatic new addition to the federal landscape – the Consumer Financial Protection Bureau – is a woman, the outgoing head of the Republican National Committee is African American and the most prominent leader in the Republican Party is a woman.
Sadly, this aspect of the Dodd-Frank Act is not the target of the grumbling of the newly enfranchised Republican majority in the House of Representatives. That is understandable, albeit for a crassly selfish reason: the Republicans are eager to attract more women and non-whites as members, and targeting this new bureaucracy could easily be spun by their Democratic opponents into something negative.
Since we are stuck with these new offices – at least for the foreseeable future – we might as well wish them success in their upcoming activities. And if we're lucky, they will be able to display a level of intelligence, planning and maturity that has been conspicuously absent from too many offices within Washington.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)