Credit UnionTimes recently posted a guest editorial written by MarkBrantley, who serves as the vice chairman for the African-AmericanCredit Union Coalition. Entitled, “PuttingAction Into Diversity,” the op-ed, among other things, urgedthe NCUA to appoint a permanent director for the agency’s Office ofMinority and Women Inclusion “sooner rather than later.”

Mr. Brantley also expressed his optimism that the NCUA and otherbanking regulators would issue a joint final rule of theProposed Interagency Statement Establishing Joint Standards forAssessing the Diversity Policies and Practices of EntitiesRegulated by the Agencies…“that is substantive andmeaningfully aligned with the intent of Section 342 ofDodd-Frank.”

The NCUA’s costly and burdensome diversity rule would not leadto the substantive and participatory diversity that the AACUC’sleader seeks for the nation’s credit unions. It would insteadprovide counter-productive support for private causes of actionagainst credit unions. It would increase the potential forreputation risk at credit unions. And, it would establishunrealistic de facto quotas for credit unions’ employeehiring and third-party provider practices. It is also important toknow that NAFCU and CUNA opposed the initially-proposed diversityrule in 2014, as did many of the state trade associations.

Although I strongly support Mr. Brantley’s First Amendment rightto peaceably assemble and petition the government for a redress ofhis perceived grievances, I am compelled to argue against theSection 342 mandate from the highly-partisan andstill-controversial Dodd-Frank Wall Street Reform and ConsumerProtection Act of 2010.

I watched nearly every Congressional hearing leading up to thenotorious Dodd-Frank Act, including the acrimoniouseleventh-hour insertion of Section 342 by the then-majorityDemocrats. The legislation as a whole, and especially Section 342,was meant to be punitive. This diversity rule would arrive in thepolarized contextual environment which includes the run-up to the2016 presidential election. It is also during a time when theRepublicans, most of whom vociferously dislike the Dodd-FrankAct, have majorities in both chambers of Congress, and apro-Dodd-Frank Act Democrat serves as president. Theinteragency diversity rule is more likely to be divisive, thanuniting.

Like the disputed, statistically-baseddisparate impact theory used in fair lending enforcement thatis currently under review by the U.S. Supreme Court, theinteragency OMWI diversity rule likely violates theAdministrative Procedures Act restricting federal agenciesfrom exceeding the powers given them by statute, and the extremelyimportant Fourteenth Amendment Equal Protection Clause. The verysecond that a final diversity rule exists, it will face acontentious legal battle. Federal civil rights law prevents creditunions from making hiring or contracting decisions based on race,ethnicity, or sex. Increasing a protected group’s numbers simply toincrease diversity is not a compelling interest sufficient tojustify racial or gender discrimination.

In justifying the need for the diversity rule, Mr. Brantleyquoted one short phrase found in both the FDIC’s Office ofInspector General’s 84-page November 2014 report entitled, “TheFDIC’s Efforts to Provide Equal Opportunity and Achieve SeniorManagement Diversity,” and in the 62-page Office of the Comptrollerof the Currency’s December 2014 audit entitled, “Review of OCC’sPersonnel Practices.” What was something of a puzzle why hedid not mention the NCUA OIG’s 64-page November 2014 reportentitled, “Review of NCUA’s Efforts to Promote Equal Opportunityand Achieve Diversity in Senior Management.” If he had readit, he would have realized that the agency’s acting OMWI Directorhad not been sitting on her hands last year. She had beenextremely busy.

One also learns from the NCUA’s report, as well as from theother banking agencies reports, just how complex it is to complywith the federal government’s recruiting and hiring requirements,even without consideration of the OMWI expectations. According tothe FDIC, “Title 5 of the United States Code, section 2301(b)(1)provides that federal recruitment should be from qualifiedindividuals from appropriate sources in an endeavor to achieve aworkforce from all segments of society, and selection andadvancement should be determined solely on the basis of relativeability, knowledge, and skills, after fair and open competitionwhich assures that all receive equal opportunity. As the nation’slargest employer, the federal government has an obligation to leadby example. Seeking to attain a diverse, qualified workforce is acornerstone of the merit-based civil service.”

The NCUA is a relatively small government agency with ageographically-dispersed workforce. Our geographically-vast nationdoes not represent state-by-state and county-by-county, thedemographics of the statistical civilian labor force. Neither theNCUA nor individual credit unions will readily “measure-up” to theSection 342 quotas. Hello, reputation risk.

Preferential hiring and contracting, based on statisticalquotas, should not exist in the federal government. Unfortunately,thanks to Section 342 and other bad laws, it does. And if theinteragency diversity rule mandated by Section 342 imposes thosewrong-headed and costly burdens on credit unions hiring andcontracting, it will be yet another disruption that the industrycan chalk up to the awful Dodd-Frank Act, and the specialinterest groups that perceived that they benefit from it, butreally don’t. Credit union members of all ethnicities and genderswill be the ultimate losers from this misguided government policy.

Marvin Umholtz

Umholtz Strategic Planning & Consulting Services

Olympia, Wash.