The Washington Informer
By Stacy M. Brown

If there were ever a mystery about who’s behind the agencies that regulate financial institutions in the United States, it was never about race or ethnicity.

A scathing new analysis authored by Berkeley, California-based The Greenlining Institute, a racial-justice institute that works to bring the American dream within reach of all, regardless of race or income, has revealed that those agencies have a diversity problem which they need to get serious about fixing.

“For too long, diversity has been regarded as largely a politically correct feel-good initiative in the financial sector — something that might be nice to do, but that is of little consequence to the larger missions of both financial businesses and the regulatory entities that oversee them,” Greenlining President Orson Aguilar and Danielle Beavers, the institute’s director of diversity and inclusion, wrote in the analysis.

Institute officials noted that during the financial crisis of 2008, communities of color were hit first and worst. Financial decision-makers in the period leading up to the crisis, including banking executives and leaders of the regulatory agencies, were largely white and simply missed the signals from communities of color about mounting problems with high-cost mortgages and other indicators.

Key Findings

Key findings from the report include:

• On average, the eight agencies that submitted data employed 33.52 percent people of color, consistent with the U.S. civilian and financial sector labor forces. Some agencies improved their overall diversity since Greenlining’s last analysis in 2011.

• Upper level management in the agencies, however, showed much less diversity, with people of color making up only 17.76 of executive management.

• People of color were also severely underrepresented in jobs deemed “mission-critical,” such as attorneys and economists. Latinos were the most underrepresented, making up just 3.49 percent of the mission-critical workforce.

• Contracting with minority-owned vendors by the agencies varied dramatically from agency to agency, from just 2.6 percent of total contracts up to 36 percent, with an average of 17.61 percent.

• To make progress, the agencies need to focus consciously on diversity with strategic plans, analysis of barriers to diverse hiring, and better data — particularly on the diversity of contractors.

The Dodd-Frank Act of 2010 required eight federal agencies — including the bank, credit union and securities regulators — and the 12 Federal Reserve banks to establish an Office of Minority and Women Inclusion (OMWI). Congress created the OMWIs to leverage diversity and help reform the financial sector.

Disparities Persist

In addition to monitoring the private financial sector’s diversity, the OMWIs are also cleaning up shop internally, working to diversify agencies’ staff and contracting with outside vendors. Unfortunately, racial disparities persist, particularly in the most critical positions.

When The Greenlining Institute examined the 2014 diversity data provided by the eight federal agencies — including the Federal Reserve Board, Federal Deposit Insurance Corp. and Securities and Exchange Commission — they found that overall 33.5 percent of their combined workforce were people of color, roughly consistent with demographics of the U.S. civilian and financial sector labor forces.

However, up the organization food chain, diversity declines sharply. In upper-level management, African-Americans, Asian-Americans and Latinos are grossly underrepresented. Collectively, people of color represent just 17.76 percent of executive management roles in these agencies.

The institute also found a similar pattern in jobs deemed mission-critical such as attorneys, economists and examiners.

These positions not only play fundamental roles in an agency’s work, but they also form the pipeline to executive roles, making their diversity critical. Once again, people of color were often underrepresented, sometimes shockingly so.

Minority Vendors

Latinos, for example, make up 16.4 percent of the U.S. workforce, but only 3.49 percent of the mission critical workforce in these agencies.

These agencies, like other large organizations, buy lots of goods and services from outside vendors. Here, too, the diversity results were disappointing.

On average, the agencies spent 17.61 percent of their total procurement budgets with minority-owned vendors. Such spending also varied massively from agency to agency. For example, the Office of the Comptroller of the Currency spent 36 percent of its procurement budget with minority-owned vendors, compared to just 2.6 percent at the National Credit Union Administration.

Asian-American-owned businesses received the majority of supplier diversity dollars (9.25 percent), while Latino- and African-American-owned businesses received smaller shares — 5.25 percent and 3.14 percent, respectively.

“We’re clearly far from having a financial regulatory system that looks like America,” the institute’s report authors said.

Attorney Melinda Guzman, CEO of Melinda Guzman Professional Corporation, a certified woman- and Hispanic-owned law firm, has served since 2007 as an independent director for the Federal Home Loan Bank of San Francisco, where she’s vice chair of the bank’s governance committee.

With Guzman as director, the Federal Home Loan Bank of San Francisco has solidified its reputation of delivering low-cost funding and other services that help member financial institutions make home mortgages to people of all income levels and provide credits that supports neighborhoods and communities.

Guzman said The Greenlining Institute’s report wasn’t surprising.

“The report reflects reality,” she said. “It’s a significant problem because the world has changed. The Federal Housing Finance Agency under the leadership of Director Mel Watt has created the Office of Minority and Women Inclusion for the system. I was appointed to serve on a special task force for Diversity in Board Governance.”

Guzman said a couple of factors likely affect diversity.

“First, having diverse and committed voices plays a big role in the selection of candidates. Second, location,” she said.

Denise Rolark Barnes, publisher of African-American newspaper The Washington Informer and chairman of the National Newspaper Publishers Association, said it’s regrettable that diversity remains a problem with federal bank regulators.

Also, minority media must step up and hold the government accountable, she said.

“Thank goodness for those employees of color who represent the rank within the federal financial agencies, but who clearly may lack support from a monolithic group of executive managers, according to this report,” Rolark Barnes said. “Those employees are the ones who most likely reflect the population preyed upon by financial regulators who devastated communities of color all across the country.

“The Black Press must be more vigilant in our efforts to make sure congressional mandates that should make a difference in correcting disparities are not ignored,” she said.

NAHP President Martha Montoya, who’s also publisher of the award-winning El Mundo Newspaper and the creator of Los Kitos, echoed Rolark Barnes’ comments.

“These key decision-making bodies remain dramatically unbalanced and unrepresentative of the vast majority of people who participate in the economy,” Montoya said. “They ignore the fact that the Hispanic consumer continues to outspend other groups and our $1.3 trillion in economic contribution drives U.S. consumer markets.”

Hopeful Signs

The authors of the Greenlining study did note that there were hopeful signs.

“For one, Congress has started paying more attention, with members voicing their concerns,” they wrote. “In May, over 120 members of Congress submitted a letter calling for more diversity in the Federal Reserve System. In late June, a record number of senators stressed the importance of agency diversity during the Fed’s semiannual monetary policy briefing.

“The Congressional Black, Hispanic and Asian and Pacific Islander caucuses banded together and called on multiple agency leaders to adopt recommendations on their internal diversity practices,” the report said.

Congress is off to a good start and should keep paying attention — simply reacting to controversies isn’t enough, the report said.

“Our elected leaders should remember that this lack of diversity isn’t limited to any one agency or group of agencies, but is endemic across the government, and they should use their power to push government to look more like America,” the authors wrote.