Conservative media have falsely warned that a provision in the Wall Street regulatory reform law institutes racial quotas for hiring and used that claim to revisit the smear that lending to minorities caused the economic crisis. In fact, the law sets no racial or gender quotas for hiring or lending.
Conservative media advance false claim of racial or gender quotas in law
NY Post op-ed: "Racial quotas for business loans." In an August 12 op-ed in the New York Post that carried the subhead "Racial quotas for business loans," Hoover Institution fellow Paul Sperry accused the Obama administration of "racism of a different kind" for what Sperry called "a scheme to force affirmative action on small-business lending." Sperry alleged that the provision was "[b]uried deep inside" the Dodd-Frank Wall Street Reform Act, which he called "a 'reform' with ominous implications for the US economy." Sperry went on to charge that this provision "is guaranteed to have perverse effects -- just like the drive for 'racial fairness' in mortgage lending paved the way for the subprime crisis and the 2008 financial meltdown."
Wash. Times: Law "is a backdoor way of instituting a racial quota system." In an editorial headlined "Quotas by proxy in Dodd-Frank bill," The Washington Times cited Section 342 of the bill and said that supporters of the financial reform bill are "on record supporting discrimination imposed by rampaging bureaucrats." The Times said that under the law, "this means federal hacks can pressure a vast array of private companies to make hiring decisions based on race," adding, "It is a backdoor way of instituting a racial quota system." The editorial went on to claim: "The disruptions to the economy of such a coercive policy also could be severe. These pressures for minority outreach almost certainly will, in practice, pressure lending institutions into making loans to otherwise unqualified borrowers. That, of course, is part of what precipitated the financial crisis in 2008."
Limbaugh falsely claimed law "imposes quotas on financial institutions." On the July 21 edition of his radio show, Rush Limbaugh read from a CNSNews.com commentary that claimed that the financial reform bill would "give a statutory advantage in the job market to a young lady" as opposed to a man. Limbaugh went on to falsely claim that the financial reform law "imposes quotas on financial institutions -- racial quotas, gender quotas," which, Limbaugh added, "is hiring for minorities and women -- not race-neutral and not sex-neutral." Limbaugh further alleged that "[t]here are quotas throughout the financial regulatory reform bill" and asserted that this action shows "the ruling class picking the winners and losers," which the law has now "codified."
WSJ: Racial and gender provision in law will "order regulators to allocate credit by race and gender." In an editorial, The Wall Street Journal stated that under the bill, "Congress will now order regulators to allocate credit by race and gender." The Journal also accused the Obama administration of "politicizing" the Federal Reserve, writing that "[w]ith the threat of such an accusation in their holster," regulators "will have enormous clout to influence Fed governance and regulatory decisions, perhaps including monetary policy." The editorial also stated that the recent "financial mania and panic" was "caused in part by political pressure for 'affordable housing.' "
BigGovernment op-ed alleges law contains "potentially unconstitutional racial and gender preference provisions." In a Big Government post headlined "Bank Bailout Bill's Potentially Unconstitutional Racial and Gender Quotas," the Heritage Foundation's Brian Darling alleged that the law contains "potentially unconstitutional racial and gender preference provisions" that will be forced on financial institutions and that the "legislation does not merely set up one bureaucracy, but it will be a jobs program for those who specialize in forcing racial and gender quotas on private enterprise."
Fact: Law sets no quotas, ratios, or goals for hiring
Bill section does not set quotas. Section 342 of the financial reform bill -- which conservatives have cited to claim that there are quotas in the bill -- establishes Offices of Minority and Women Inclusion in certain federal agencies and defines the duties of those offices. One of their duties is to "develop and implement standards and procedures to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels." The section -- which covers more than two pages -- does not establish any quota.
Politico: "The law sets no quotas, not even ratios or goals for hiring." In a July 28 article, Politico reported on critics' claim that the provision "could lead to an unofficial quota system," writing that the "law sets no quotas, not even ratios or goals for hiring. And the government has options other than termination at its disposal for contractors who fail to meet the 'fair inclusion' standard, including referring the matter to the Labor Department." Politico further reported that advocates of the measure contend "it is a past-due shove to an elite industry that is heavily male and white -- one in which Government Accountability Office studies show women and minorities have made only minimal gains in the past 15 years."
The Root: Reform bill provision "does not require quotas of any kind." In her August 5 column for The Root headlined "The Right Sees Quotas Where They Don't Exist," University of Maryland law professor Sherrilyn A. Ifill pushed back on claims that the financial reform law contains racial quotas, writing, "[W]hat Section 342 does is unusual and important. It does not require quotas of any kind. What it does do is what too few diversity initiatives do: It spells out in clear language what 'good faith' diversity efforts look like, without requiring any agency to hire a specific number of minorities or women, or contract with minority- or women-owned businesses. The provisions speak only to meaningful outreach." Ifill added: "Section 342 doesn't require racial quotas, and those on the right know it. In many ways it is a garden-variety diversity initiative, but one that uniquely removes the wiggle room exercised by too many contractors and government agencies that in the past have paid only lip service to meaningful diversity efforts."
Right wing routinely raises specter of illegal quotas to malign diversity programs
The Root: According to right wing, "fairness and inclusion mean quotas." In her column, Ifill also wrote: "What has so many on the right up in arms is the requirement that agencies covered by the act's provisions show 'good faith effort' to ensure the 'fair inclusion of minorities and women.' Yes, that's right -- good faith and fairness. In the world of those who have made a career out of equating affirmative action and diversity with mandatory quotas, fairness and inclusion mean quotas. Some have even gone so far as to suggest that such language may be unconstitutional. In the new world of hysterical right-wing fantasies, 'good faith effort' and 'fair inclusion' are constitutionally impermissible."
Harvard law prof Guinier states that the right uses "rhetorical assaults" to "equate race with quotas." In a Village Voice op-ed discussing the University of Michigan Law School affirmative action case in 2003, Harvard law professor Lani Guinier wrote of how when her father arrived at Harvard College to apply for financial aid, he was deemed ineligible because the college had already admitted one black student. She discussed how affirmative action -- which is often tarred as quotas -- differs from real quotas such as the one used to keep her father out of Harvard:
Harvard College had a quota for blacks, a quota of one. Many schools had similar quotas to keep out Jews as well.
Quotas are arbitrary ceilings or rigid and fixed numerical floors. Quotas are typically used to exclude people because they belong to a stigmatized racial or ethnic group. Quotas are presumably offensive not only because they are exclusionary but because they treat people as members of a low-status and unwanted group, and not as individuals.
In her majority opinion in Barbara Grutter v. Lee Bollinger, et al. (the University of Michigan Law School affirmative action case), Justice Sandra Day O'Connor takes pains to distinguish between a commitment to diversity as a compelling governmental interest and the unconstitutional use of quotas. Only justices Clarence Thomas and Antonin Scalia attack the idea of diversity itself, leading some legal scholars to go so far as to characterize this as a "7-2" victory for diversity. Whatever the count, the court has enough hammers to nail shut the coffin on the rhetorical assaults from the right that seek to equate race with quotas: Not every consideration of race impermissibly excludes; race can be a relevant factor without becoming an illegal quota. Presumably, my father would now would be constitutionally eligible for financial aid.
ACLU: "[T]o discredit affirmative action, some critics insist on equating these remedial goals with 'quotas.' " In a briefing paper, the American Civil Liberties Union argued that "where discrimination has been found to be extreme, the only reasonable way of remedying it is to set numerical goals that can reasonably be met within a prescribed period of time," making the distinction that "such goals are flexible, temporary and are remedial instruments of inclusion, while quotas are fixed, intended to be permanent and were used historically to exclude members of some ethnic groups from jobs and education." The paper also stated: "Seeking to discredit affirmative action, some critics insist on equating these remedial goals with 'quotas.' "
FAIR: Using "hot-button term" quota "as shorthand for any and all affirmation action" is "misleading." In an article documenting how the press frames affirmation action, Fairness & Accuracy in Reporting wrote that "[a]ffirmative action is surrounded by misconceptions, which its opponents find easy to exploit" and that "rather than carefully examining -- and perhaps defusing -- the issue, many in the press have further clouded and inflamed things with misapplied terminology." FAIR went on to write:
The most obvious example is the word "quota." Quotas are illegal unless imposed by a court, as every relevant Supreme Court ruling since the 1978 Bakke case has made clear. Anyone who has been denied a job through an illegal quota can find a ready remedy in the courts.
But this fact, reiterated in the Civil Rights Act of 1991, hasn't stopped media outlets from using the hot-button term as shorthand for any and all affirmative action.
No less misleading is the reference to "racial preferences." This term plays on the idea that affirmative action policies artificially promote some groups over others, without regard to qualifications.
In fact, most affirmative action programs rely on tools like aggressive recruitment and outreach plans to achieve diversity. When set-asides have been used, as with construction contracts, it is because there is proof that qualified applicants have been rejected on the basis of their race. As the law stands now, all federal and state affirmative action programs must establish a record of discrimination--in other words, that it is whites or men that have been receiving "preferences."
Experts reject claims that affordable housing initiatives caused the financial crisis
Bernanke: Experience "runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." The companion conservative claim that lending to minorities under the Community Reinvestment Act caused the financial crisis is also untrue. In a November 25, 2008, letter, Federal Reserve chairman Ben Bernanke stated: "Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." Bernanke further wrote:
Further, a recent Board staff analysis of the Home Mortgage Disclosure Act and other data sources does not find evidence that CRA caused high default levels in the subprime market.
As the financial crisis has unfolded, many factors have been suggested as contributing to the current mortgage market difficulties. Among these are declining home values, incentives for originators to place loan quantity over quality, and inadequate risk management of complex financial instruments. The available evidence to date, however, does not lend support to the argument that CRA is to blame for causing the subprime mortgage crisis.
SF Reserve Bank's Yellen: "[S]tudies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households." Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, in a March 2008 speech criticized efforts to blame CRA lending for weaknesses in the mortgage market, stating:
There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term.
Slate's Gross: "The notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd." In an October 2008 Slate.com article, Daniel Gross, a business columnist for Newsweek and author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, criticized the notion that affordable housing initiatives caused the financial crisis, writing that "the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd" and that "lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all." Gross further explained, "On the other hand, lending money recklessly to obscenely rich white guys ... can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity."
Most subprime mortgages not issued by institutions under CRA. In a paper published on the website of the Federal Reserve Bank of San Francisco, Michigan law professor Michael Barr stated that as of 2005: "Only 25 percent of subprime loans were made by banks and thrifts, and the Federal Reserve reports that only six percent of subprime loans were CRA-eligible." Similarly, a 2008 study by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.
Gross: Investment banks to blame for subprime loans. In his October 2008 Slate article, Gross wrote:
There was a culture of stupid, reckless lending, of which Fannie Mae and Freddie Mac and the subprime lenders were an integral part. But the dumb lending virus originated in Greenwich, Ct., midtown Manhattan, and Southern California, not Eastchester, Brownsville, and Washington. Investment banks created a demand for subprime loans because they saw it as a new asset class that they could dominate. They made subprime loans for the same reason they made other loans: They could get paid for making the loans, for turning them into securities, and for trading them -- frequently using borrowed capital.