Quotas Hidden in Bank Reform Bill Will Cost Taxpayers Millions

Thursday, 15 Jul 2010 07:27 PM

By David A. Patten

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Buried deep in the bowels of the massive financial-regulation bill the Senate passed Thursday are massive race- and gender-employment provisions that will cost countless millions to enforce and appear to duplicate other civil-rights initiatives already in place.

More importantly, all private financial institutions doing business with the federal government will be affected by them, sources tell Newsmax.

Opponents say the provision was put in the bill to help garner political support for its passage. They object that it was inserted with almost no discussion or debate, and call it a "power grab."

Diana Furchtgott-Roth, a senior fellow at the Hudson Institute who served as chief of staff for former President George W. Bush's Council of Economic Advisers, tells Newsmax that the rules represent a "dramatic change in employment legislation."

Four members of the U.S. Commission on Civil Rights recently penned a letter to Vice President Joe Biden, Majority Leader Harry Reid, and several other leading senators, objecting to the new fair-employment regime in the Dodd-Frank legislation now headed to the president's desk.

"The likelihood that it will in fact promote discrimination is overwhelming," the letter states.

Section 342 of the bill calls for an "Office of Minority and Women Inclusion" to be established in each of 29 federal bureaus and offices.

The regulations appear to go beyond ensuring that discrimination in hiring decisions does not occur. Instead, they require assurance of "fair inclusion." Furchtgott-Roth says it will pressure companies to find and hire minorities even if one hasn't applied for a specific job.

The bill's affirmative action provisions — some suggest they are de facto quotas — would apply not only to the 29 federal agencies but also to all "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" who do business with them.

Moreover, the law also applies to those firms' sub-contractors "as applicable."

Furchtgott-Roth says that means financial firms seeking to do business with the government will have to verify the racial and gender composition of their subcontractors — including office-cleaning crews, paper-shredding vendors, office-party catering firms — if they want to do business with the government.

Each Office of Minority of Women Inclusion will have an executive-level director, and support personnel, who will set standards to increase "participation of minority-owned and women-owned businesses in the programs and contract of the agency."

Each office director is required to recommend the termination of any contractor who refuses to show good faith in efforts to comply with the Section 342 standards.

Among the federal agencies affected:
  • The 10 offices of the Department of the Treasury.
  • The Federal Deposit Insurance Corp.
  • The Federal Housing Finance Agency
  • Each of the 12 Federal Reserve regional banks
  • The Federal Research Board
  • The National Credit Union Administration
  • The Office of Comptroller of the Currency
  • The Securities and Exchange Commission
  • The newly established Consumer Financial Protection Bureau
If each of those offices employs just 10 people, each of whom meets the average federal compensation level of $200,000 including salary, benefits, and office-space cost, the program would cost $58 million a year in staffing and office space alone.

Furchtgott-Roth says the real cost of Section. 342, however, will be its impact on the financial sector.

The additional expenses and inefficiencies sustained by the companies that do business with the specified agencies would make them less competitive, she says.

The broad expansion of affirmation action programs in the bill went largely unnoticed, even after Furchtgott-Roth published an article on RealClearMarkets.com titled "Gender Quotas in the Financial Sector?"

"The new Offices of Women and Minorities represent a major change in employment law by imposing gender and racial quotas on the financial industry," Furchtgott-Roth wrote.

Furchtgott-Roth, director of the Hudson Institute's Center for Employment Policy, noted the tortuous legal history of quotas, and said the Dodd-Frank provisions are "broad and vague, and are certain to increase inefficiency in federal agencies."

Moreover, she calls the establishment of the minority offices "a troubling indictment" of current law.

"Women and minorities have an ample range of legal avenues already to ensure that businesses engage in nondiscriminatory practices," she writes. "By creating these new offices, Congress does not believe that existing law is sufficient."

All Cabinet-level departments already have Offices of Civil Rights and Diversity, she noted. The Labor Department's Office of Federal Contract Compliance and the Equal Employment Opportunity Commission already oversee fair-hiring practices.

"With the new financial regulation law," writes Furchtgott-Roth, "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."

The four civil rights commissioners say in their letter than "some legislators" add affirmative action provisions to major legislation under consideration to garner political support to get a bill passed.

The commissioners' letter states that, "like several major bills that have passed or may pass the 111th Congress, the Dodd-Frank bill includes a section on race and gender that even those who pride themselves on keeping up with national affairs may have failed to notice. It's not hidden, but in a document that is almost 2,000 pages long, nothing can ever be as accessible as we would like it to be."

Furchtgott-Roth writes that "the issue deserves careful debate — rather than a few pages slipped into the financial regulation bill."

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