Washington, DC, Feb. 6, 2014 – The Dodd-Frank Act regulates the financial sector, but what many people do not know is how far its regulations go in mandating racial and gender hiring practices. This Friday, February 7, marks the deadline for public comment on recently proposed regulations to extend the reach of those requirements. Legal scholar Hans Bader at the Competitive Enterprise Institute challenges the policy proposal’s constitutionality as it pressures banks to involuntarily institute “diversity quotas.”
“Courts have said diversity is not reason enough to use race or gender in the hiring process, and ruled unconstitutional agencies’ use of race and gender to promote diversity in regulated businesses,” said Bader. “We urge the ‘Proposed Statement’ be revised to avoid judging the diversity policies of banks or other regulated entities based on their use of numerical goals, metrics, or percentages with regard to diversity in hiring or contracting, because it may lead to unlawful discrimination by the regulated entities.”
As Bader has previously warned, the diversity requirement in question may not even increase minority representation as intended but will certainly “impose substantial compliance costs on banks.”
Note: Under Section 342 of the Dodd-Frank Act, the agencies required to issue the proposed policy statement include: the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.