New “Diversity” Regulations Coming

This is “financial” reform?

The recently enacted financial reform legislation tries in numerous ways to change how Wall Street companies and their federal regulators act, but a little-noticed provision aims for something potentially more difficult and controversial — altering how they look.

To promote diversity in the largely white, male world, the new law requires each of the 30 federal financial agencies and departments, including the Securities and Exchange Commission and all 12 Federal Reserve banks, to establish an Office of Minority and Women Inclusion.

Those offices will work with vaguely defined powers to boost diversity at their agencies and the companies they regulate, and to increase federal contracting opportunities for minority- and women-owned businesses. Banks and other financial firms determined to have failed to make “a good-faith effort to include minorities and women in their workforce” could lose their government contracts.

And once again, the uncertainty is killing businesses.

If the legislation is interpreted broadly, the diversity requirements could reach down to subcontractors who provide food or janitorial services — something not required under current rules, said Jon Geier, an employment law expert at the Paul Hastings law firm.

“My clients are wondering what more will they have to do?” he said. “I can’t tell them yet. It could be substantial. It could be a paper tiger.”