"Diversification" on Wall Street

I refrained from commenting on the passing of the recent financial reform bill for the simple reason that my reaction was much like that of other undeceived libertarians and conservatives: the people who laid the foundation for the crisis, Geithner and the Fed, are the ones empowered by the bill.

But over the past few days, some lesser known provisions in the bill have come to light that deserve analysis.  As reported by Investor’s Business Daily (and picked up by American Renaissance), the “Restoring American Financial Stability Act of 2010” will require that Washington institute all sorts of new affirmative-action and racial-preference programs in the industry it recently bailed out.

Yes, the bill gives Treasury the power to liquidate banks that pose a threat to financial stability. But it essentially exempts minority-owned banks and those approved by Acorn-style urban organizers.

“The orderly liquidation plan shall take into account actions to avoid or mitigate potential adverse effects on low-income, minority or underserved communities affected by the failure of the covered financial company,” it says.

{snip}

Sen. Richard Shelby and other GOP conferees moved to strike the language, arguing that making an exception for minority neighborhoods defeats the whole purpose of reform, which is to protect all consumers against systemic risk.

But Sen. Chris Dodd, who’s running the conference committee with his fellow Democrat, Rep. Barney Frank, shot them down by suggesting that they wanted to deny minorities access to credit.

{snip}

Studies show that CRA home loans have much higher failure rates. {snip}

Another section of the bill requires the proposed Financial Stability Oversight Council (headed by the Treasury secretary) to consider a zombie institution’s “importance as a source of credit for low-income, minority or underserved communities” before winding it down. {snip}

{snip}

The bill mandates placement of a diversity czar in each federal financial agency—including the Fed and its 12 regional banks.

Establishing a so-called Office of Minority and Women Inclusion within each agency is the idea of Democratic Rep. Maxine Waters, a Congressional Black Caucus leader and conferee.

According to her amendment to the bill, “Each agency shall take affirmative steps to seek diversity in the workplace of the agency, at all levels of the agency,” including:

* Recruiting at “historically black colleges and Hispanic-serving institutions.”

* Recruiting in urban communities.

* Placing ads in African-American and Spanish newspapers.

* “Partnering with organizations that are focused on developing opportunities for minorities.”

{snip}

Each agency, in turn, is required to report to Congress detailed information describing the actions it took to diversify its staff and contract with minority-owned firms. Which means they’ll do what their diversity officers advise. No official—particularly no regional Fed bank president—wants to be dragged before Barney Frank’s panel and accused of racism.

Still, as insurance, the bill also calls for an audit of Fed “governance” to examine, among other things, “the extent to which the current system of appointing Federal Reserve bank directors effectively represents the public without discrimination on the basis of race, creed, color, sex or national origin.”