President Joe Biden signed an executive order in June that seeks to increase diversity among federal workers, with the White House saying that the U.S. is at “its strongest when our nation’s public servants reflect the full diversity of the American people.”
By that measure, the nation’s agencies overseeing the financial industry have a ways to go.
A Brookings study published last year found that 327 people have been nominated for and sat on the governing boards of U.S. financial regulation agencies. Of that 327, only 10 have been Black. That trend needs to change, some lawmakers and experts told CBS MoneyWatch.
A handful of agencies — including the Federal Deposit Insurance Corporation and the Securities and Exchange Commission — make up the interwoven network of financial authorities in the U.S. Their board members set the rules for basically everything money-related, from mortgage lending and credit card interest rates at banks to stock market trading and personal loans.
“Financial regulators literally write the rules of capitalism — and to get to informed policy decisions on issues like investor protection, financial inclusion and technology, everyone needs to participate,” said Chris Brummer, the Georgetown University professor who wrote the Brookings study.
The trouble with financial regulators being mostly White is that they will set rules in the financial realm for people of color as well, Brummer said. The nation runs the risk of enacting policies that hurt Black and Hispanic families because no one of color was around to help revise certain rules, he said.
A lack of diversity among financial regulators has persisted for decades, no matter who controlled the White House, Brummer said. Still, the Biden administration has taken steps to diversify the people placed in charge of setting financial policies.
Presiden Biden nominated a Black woman — Sandra Thompson — as director of the Federal Housing Finance Agency this week and nominated another Black woman Kristin Johnson of Emory University to a post on the Commodity Futures Trading Commission. The president has also appointed Black Americans to high positions at other federal agencies, including, most recently, putting Shalanda Young as director of the Office of Management and Budget.
Several financial regulator seats are vacant
The nation could make even greater strides toward diversity next year as several financial regulator seats are vacant, including three on the Federal Reserve System’s board and the FDIC’s vice chair spot.
Even with Biden’s efforts, many financial regulatory agencies still have predominantly White governing bodies. The Municipal Securities Rulemaking Board, for example, has 17 board members of which 13 are White. The SEC has a five-member board, of which all are White.
“This diversity problem is even worse at the top of the Fed,” said Representative Al Green of Texas, who introduced legislation this year that would require regulators to rate banks on their diversity staffing. “The current board of governors for the Fed is entirely White.”
Green said he and Representative Maxine Waters of California have introduced bills this year that seek to add more people of color to the financial industry and its regulating ranks. Green, a Democrat, said the lack of diversity is “an unfortunate legacy of our nation’s overwhelmingly White and male financial industry.”
“We cannot expect to address the problems of the racial wealth gap, systemic disinvestment in communities of color and other issues of economic injustice, without increasing the diversity of our federal financial regulatory bodies,” he told CBS MoneyWatch.
One reason why board members of financial regulatory agencies haven’t been as diverse is because politicians have historically picked nominees from a pool of former U.S. Senate staffers or business law professors — two groups that have lacked Black representation, Brummer said. Regulatory agencies should think about pulling new applicants from nonprofits or minority-owned banks, he added.
Brummer’s study noted that the first Black American to serve on a financial regulatory board was Andrew Brimmer in 1966 on the Fed. The most recent person is Rodney Hood, who sits on the National Credit Union Administration. There could be more in the future, but Brummer said it will require a change of thinking in Washington.
“You have to give new people a seat at the table and give up some of the power,” Brummer said. “That’s never easy.”
Here are the agencies and their latest racial breakdown:
- FDIC, which oversees banks: 5 board members; 3 White, 2 Asian
- SEC, which regulates stock market trading: 5 board members; all White
- Office of the Comptroller of the Currency, which regulates national banks: 1 acting comptroller, who is Asian
- Commodity Futures Trading Commission, which regulates the derivatives market: 2 commissioners, both White
- Consumer Financial Protection Bureau, which oversees financial products: no governing board, just one director, who is Asian
- National Credit Union Administration, which oversees credit unions: 3 board members; 2 White, 1 Black
- Federal Housing Finance Agency, which regulates federally backed mortgages: no governing board, just one acting director, who is Black
- Federal Reserve System, which regulates banking services: 6 board members, all of whom are White
- Municipal Securities Rulemaking Board, which oversees government bond markets: 17 board members; 13 White, 2 Asian, 2 Black