A small provision in the financial reform law signed last week by President Obama grants the federal government new powers to force financial firms to hire more women and minorities as part of the administration’s strategy to promote diversity on Wall Street.
Written by Rep. Maxine Waters of California and buried inside the more than 2,000-page bill, the provision didn’t attract much notice until the law was signed; it authorizes the federal government to cancel contracts with any company that fails to ensure the “fair inclusion” of women and minorities in their workforce.
The language goes further than any previous attempt by the government to promote diversity in the financial sector, either through direct hiring of individuals or dolling out contracts to small minority- and women-owned firms. However, the law sets no quotas – not even ratios – or goals for hiring.
Minority groups have pushed for this change since the recession hit more than two years ago, when billions in taxpayer dollars flowed into struggling Wall Street banks to keep them afloat. Meanwhile, minority- and women-owned businesses received nothing and unemployment within the African-American community soared to 15 percent. The collapse of the subprime mortgage market disproportionately hit African-American and Latino homeowners.
The provision establishes at least 20 new Offices of Minority and Women Inclusion across the Treasury Department, Federal Reserve, Securities and Exchange Commission and other finance-related agencies. The law orders the directors of these offices to develop standards that ensure the fair inclusion and utilization of minorities, women and minority- and women-owned businesses in all business and activities of the agency at all levels, including in procurement, insurance and all types of contracts.
If the director determines a firm failed to make a good faith effort, the contract can be cancelled or referred to the Labor Department’s Office of Federal Contract Compliance for review.