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.
Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.
Here's the actual text of the bill
(d) APPLICABILITY.--This section shall apply to all contracts of an agency for services of any kind, including the services of 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. The contracts referred to in this subsection include all contracts for all 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.