The Stealth Revolution

With the Obama administration and its allies in Congress, what you don't see is what you get. Opaque is the new transparent--especially when it's needed to effect something the public would never countenance if they could see it clearly.

Consider the 2300-page Dodd-Frank financial "reform" bill (how about that, naming the cure after the disease!) now set for a final vote in the Senate on Thursday, July 15. Whatever its (minimal) merits as a means to prevent another financial crisis like the one we just passed/are passing through, there's an element buried within it that would justify its defeat all by itself--and it has virtually nothing to do with financial practices.

Late last week, economist Diana Furchtgott-Roth reported her discovery in the bill of theretofore unpublicized "Section 342, which declares that race and gender employment ratios, if not quotas, must be observed by private financial institutions that do business with the government." The author observed:

In addition to this 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. This has had no coverage by the news media and has large implications.

The Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the 12 Federal Reserve regional banks, the Board of Governors of the Fed, the National Credit Union Administration, the Comptroller of the Currency, the Securities and Exchange Commission, the new Consumer Financial Protection Bureau...all would get their own Office of Minority and Women Inclusion.

Each office would have its own director and staff to develop policies promoting equal employment opportunities and racial, ethnic, and gender diversity of not just the agency's workforce, but also the workforces of its contractors and sub-contractors.

What would be the mission of this new corps of Federal monitors? The Dodd-Frank bill sets it forth succinctly and simply - all too simply. The mission, it says, 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.

Ms. Diana Furchtgott-Roth further points out that by its terms, Section 242's "fair" employment test applies to "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"--apparently that would include law firms working for financial entities. "Contracts" are likewise defined broadly as "all contracts for 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."

Section 342's provisions, the author noted, will promote government inefficiency because, "to comply, federal agencies are likely to find it easier to employ and contract with less-qualified women and minorities, merely in order to avoid regulatory trouble. This would in turn decrease the agencies' efficiency, productivity and output, while increasing their costs." She also observes that cabinet-level departments already have individual Offices of Civil Rights and Diversity, and that the Equal Employment Opportunity Commission and the Labor Department's Office of Federal Contract Compliance are charged with enforcing racial and gender discrimination laws. "With the new financial regulation law, 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."

Not surprisingly, this provision of the legislation originated with infamous leftist Congresswoman Maxine Waters of Los Angeles. As the Wall Street Journal observes:

Ms. Waters and the House are hunting bigger game—to wit, the political allocation of credit. They want to put a network of operatives at the highest level of government who are responsible for making sure that regulators put the hiring of, and lending to, minorities at the top of their priority list. The House provision makes that very clear by making each diversity officer a Presidential appointee who must be confirmed by the Senate. . . .

Having recently lived through a financial mania and panic caused in part by political pressure for "affordable housing," Congress will now order regulators to allocate credit by race and gender. Isn't the point of this financial reform supposed to be to make regulators better judges of systemic risks, which means focusing on financial safety and soundness? If the Waters provision passes, federal regulators will have to put racial and gender lending at the top of their watch list when they do their checks on the banks and hedge funds they are regulating.

This is especially pernicious at the Fed regional banks, which have long operated independently of political intrusion. Federal Reserve bank presidents aren't appointed by the President precisely to avoid Treasury and White House control. They are appointed by their regional bank boards.

The implications of Section 242 are chilling. Not only does it establish yet another massive, pervasive, costly, and unnecessary federal bureaucracy, having nothing inherently to do with a healthy financial system, but it creates a new feeding trough for government-job seekers and a new federal police force to shake down almost every business in this country--how many don't have financial dealings with the government in some way?--and ensure that endless billions of dollars are funneled to their ethnic/gender-based clienteles.

Deafening indeed is the silence of the administration and the mainstream media regarding this development. Just as with the gargantuan health care "reform" legislation, the administration has hidden within the mammoth financial regulation bill the instruments of a radical and dangerous political agenda only incidentally concerned with the legislation's subject matter. The object, of course, is to deflect opposition and win public support for politically sensitive or unpalatable initiatives by wrapping them deep within layers of something that appears, on its surface, to be an unassailable good measure. It's like when Mom gave you aspirin all mixed up in a spoonful of sugar, or concealed in peanut butter. Except that what we're about to swallow isn't medicine--it's poison.