The Greenlining Institute, a nonprofit organization that works for equality in lending, studied racial/ethnic diversity in the workforce and management at federal financial regulatory agencies. While several of the organizations had workforce diversity, especially Blacks in agencies located in Washington, D.C., or cities, the lack of Latinos throughout the workforce and lack of all racial/ethnic diversity in the top levels of management was significant.

Greenlining feels that without an adequate understanding of these communities from senior leadership, regulatory agencies cannot effectively prevent marketplace discrimination. Other studies have documented the increasing race-based wealth gap.

“A glaring piece of data in the report is the huge lack of representation of Latinos,” says Orson Aguilar, executive director of Greenlining. “If their management more mirrored the workforce, it could have prevented the mortgage fiasco.”

Methodology

The Greenlining Institute initiated this study after the Dodds-Frank Wall Street Reform and Consumer Protection Act created Offices of Minority and Women Inclusion in 20 regulatory agencies. The agencies surveyed were the Federal Reserve’s Board of Governors, Federal Reserve Banks in Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, San Francisco and St. Louis, as well as the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency and the U.S. Department of the Treasury. One agency, the Securities and Exchange Commission, did not respond, and another, the Consumer Financial Protection Bureau, was in the process of organizing and wasn’t ready to participate.

Greenlining requested workforce, management and senior-management demographic data from each of the agencies. Initially, Greenlining also requested supplier-diversity direct-contractor dollar spend for minority-owned business enterprises, women-owned business enterprises and suppliers owned by veterans with disabilities. However, the responses were limited and aren’t included in this report.

It took about five months to collect the workforce/management data, says Divya Sundar, community reinvestment fellow.  

Key Data Findings

* For the workforce, the most racially diverse agencies were the Board of Governors and the Federal Reserve Banks in Atlanta, New York, Dallas and San Francisco.  

* The least diverse in the workforce were the Federal Reserve Banks of Cleveland, Kansas City and Minneapolis.

* Latino representation in the workforce ranged from a low of 0.9 percent at the Cleveland Federal Reserve Bank and averaged 3.8 percent nationwide. By contrast, the DiversityInc Top 50 average 8.9 percent of their U.S. workforces as Latino.

* The federal agencies have a ratio of 1:2 when comparing Black senior managers to all Black managers, while the DiversityInc Top 50 have a ratio of 2:1 for the same variables. Senior management is defined as the top three levels of the organization.

* The DiversityInc Top 50 companies are comparable for Blacks in management but have 50 percent more Latinos in management than the federal agencies and double the percentages of Asians in management.

* The DiversityInc Top 50 companies have twice the percentages of Latinos and Asians in senior management as the federal agencies. Of the 15 agencies that submitted data, only 11 had any Blacks in senior management; only eight had any Latinos in senior management; and only six had any Asians in senior management.

* Three agencies, the Federal Reserve Banks of St. Louis, Boston and Cleveland, had only whites in the senior-management category.

Recommendations

The Greenlining Institute has created a community-based advisory board to ascertain next steps. Board members, including the National Council of La Raza, the National Association of Asian American Professionals, the Center for Responsible Lending, the Los Angeles chapter of the National Urban League of Young Professionals, the National Community Reinvestment Coalition and the U.S. Hispanic Chamber of Commerce, will meet in Washington, D.C., on Feb. 24 to begin to draft more formal recommendations for action. In the interim, Greenlining suggests:

* Transparency: Requiring all financial regulatory organizations to publish diversity data online

* Analysis: A study of recruitment and retention policies in the financial regulatory sector be undertaken

* Accountability: Establishing benchmarks, including region-specific benchmarks for the Federal Reserve Bank

See also: Did the Fed’s Stunning Lack of Diversity Cause the Housing Crisis?

The post Report Documents Lack of Diversity in the Federal Reserve Banks appeared first on DiversityInc.

Luke Visconti’s Ask the White Guy column is a top draw on DiversityInc.com. Visconti, the founder and CEO of DiversityInc, is a nationally recognized leader in diversity management. In his popular column, readers who ask Visconti tough questions about race/culture, religion, gender, sexual orientation, disability and age can expect smart, direct and disarmingly frank answers.

The New York Times ran a front-page article about the 2006 Federal Reserve Board meetings—transcripts of the meetings are released after a standard five-year delay. In short, the board was unconcerned about the housing bubble, even though they discussed how the then-howling housing market was starting to teeter. As The Times put it, “The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.”

Broken Models

“Models” are broken on a regular basis, usually when one or more parameters of the model exceed the experts’ opinions on its range. For example, the Jim Crow enforcement arm, so aptly characterized by Bull Connor, could not have been expected to successfully put down Dr. King’s movement because nonviolence was not anticipated by violent, hate-filled men. Presidents Eisenhower and Kennedy didn’t take the civil-rights movement all that seriously—but President Johnson met with Dr. King as the publicity became unacceptable when photographs of “Bloody Sunday” appeared in newspapers around the world in 1965. It’s not a stretch to link the civil-rights era to the broken economic model the Federal Reserve Board was using. The Fed Board itself had (and still has) an astounding lack of diversity coupled with, in my observation, a negligible diversity-management structure.

In 2006, The Federal Reserve Board of Governors  and Federal Reserve Bank presidents were fourteen white men and four white woman.  In 2011, some of the people were  different, but the demographics are basically the same: A stunning lack of diversity.

Also in 2006, I had a speaking engagement at an American Bar Association function. After my talk, a woman came out of the crowd and told me that she had a “diversity” story for me. She asked me if I had ever been in a Philadelphia row house. I told her I had. She went on to tell me that people were refinancing their row houses for $250,000. I was astonished, and she said, “That’s right, they’re $80,000 row houses; they’ll always be $80,000 row houses. Something’s wrong.” What was wrong was that the market demand for collateralized mortgage bundles had outpaced the normal housing market, so one had to be created if the banks were to continue to make money from this cycle. The mortgage-broker predators descended on lower-middle-class people—diverse and financially unsophisticated—and sold them on a deal that was too good to be true: Take “equity” out of your house to go on vacation, buy a boat, finance college for your kids, whatever, and never have to worry, because the housing market will continue to zoom up forever.

Frankly, I didn’t know what to do with the story. Like the Federal Reserve Board of 2006, I would have done a few things differently from the perspective of retrospection.

Business Case for Diversity

But what if the Federal Reserve Board members had those kinds of feelers out in the market? What if they were supported by a diversity-management structure, chairing their diversity-council meetings, meeting regularly with employee-resource groups and mentoring people who were not from their background? What if they organized and personally involved themselves with philanthropic endeavors that didn’t serve their own kind?

Could we have avoided this horrible recession, which has put more than 18 percent of our population into unemployment or underemployment for more than three years (U-6 unemployment)? Could we have avoided more than doubling the divide between Black and Latino household wealth (now at one-twentieth and one-eighteenth of white household wealth, respectively, according to Pew Research)?

My two visits to two Federal Reserve banks tell me that their current culture would exclude that possibility. Like most federal agencies, the Fed is very formal, starchy and full of pomp and circumstance. It’s a culture that reveres its self-created hierarchy, a queasy blast from the past. It’s not all bad—in my opinion, we do not yet fully appreciate the action of the Fed Board once the crisis unfolded. I believe that they, along with President Obama, prevented the entire world’s economy from falling into the abyss and creating a depression that would have made 1933 look like a walk in the park.

The board members are good Americans, serving our country as best they can, but their lack of diversity management and stunning lack of results sharply limits their ability to perceive reality—and it limits their ability to anticipate when the next model is broken.

But it’s not just the federal government. Half of the companies on the 1997 Fortune 500 list were not in existence by 2007, in many cases overcome by circumstances that exceeded their models. Does your organization have the vulnerability of a limited perspective at the top? Now you have yet another business case for diversity. 

For more on diversity management best practices, read Why White Men Must Attend Diversity Training and  How Effective Diversity Management Drives Profit.

The post Did the Fed’s Stunning Lack of Diversity Cause the Housing Crisis? appeared first on DiversityInc.