Federal Reserve Board: H.2 Release for Week Ending October 31, 2015; Rep. Maxine Waters Issues Report on Diversity at Fed. Financial Agencies, Incl. the Board

[Update 8-March-16: Representative Maxine Waters (D-Calif.) and the Tri-Caucus issued a press release (dated 8-Jan-16) discussing the receipt of letters from the federal financial regulatory agencies.]

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending October 31, 2015, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Regulations and Policies Margin and Capital Requirements for Covered Swap Entities — (1) interagency final rule to establish minimum margin and capital requirements for swaps and security-based swaps that are not cleared through a clearinghouse, in accordance with the Dodd-Frank Act, and (2) request for comment on interim final rule to exempt from margin requirements certain non-cleared swaps, such as those used for hedging purposes by commercial end-user counterparties.

-Approved, October 30, 2015

Regulations Q and YY — publication for comment of proposed rule to require U.S. global systemically important banking organizations and the U.S. operations of systemically important foreign banks to meet a new long-term debt requirement and a new total loss-absorbing capacity requirement.

-Approved, October 30, 2015

In addition, on November 5, 2015, the Board permanently barred Mr. Rohit Bansal, former investment banker at Goldman Sachs & Co. from participating in the banking industry.

CN6B2sAUcAQ0nRs

Separately, and also on November 5, 2015, Representative Maxine Waters (D-Calif.), Ranking Member of the House Committee on Financial Services, and the Tri-Caucus, issued a report, “The Dodd-Frank Act Five Years Later: Diversity in the Financial Services Agencies.” In addition, the Committee Democrats issued a letter, with the report, to the agency heads, requesting a response by December 7, 2015.

Notably, but sadly unsurprisingly, the report found that across the federal financial agencies, black/African American employees, overall, received lower performance management scores than white employees (see graphs on page 12 of the report, especially the one for the Board at the bottom of the page).

In addition, the report had specific comments for each agency. I will quote the portion of the report relating to the Board below.

The Federal Reserve Board of Governors (FRB)

Empirically, the FRB workforce was among the most diverse of all the Agencies, both generally and with respect to the senior management. In racial, ethnic, and gender categories, its workforce diversity was found to exceed the CLF. However, the OIG found several areas where the FRB has failed to adhere to statutory requirements.

Procedurally, the FRB did not follow the statutory instructions to name the newly-established diversity office, “the Office of Minority and Women Inclusion,” and instead opted to call it the “Office of Diversity and Inclusion” (“OD&I”).

Substantively, the OIG also recommended that the OD&I Director ensure that No-FEAR Act training is offered on a regular basis, is tailored to the FRB, and includes EEO and diversity and inclusion topics in accordance with the Board’s No-FEAR Act Written Training Plan.[48. Federal Reserve Board, Office of Inspector General, THE BOARD CAN ENHANCE ITS DIVERSITY AND INCLUSION EFFORTS, (2015-MO-B006, Mar. 31, 2015), 54.] Further, the OIG suggested that such trainings be updated as necessary to address any deficiencies identified, and that attendance records be retained.[49. Id.] The OIG noted that the EEOC’s MD-715 “guidance advocates that all employees receive information about the EEO program through training on the EEO process and the protections afforded to employees, related policy statements, and reasonable accommodation procedures.”[50. Id. at 53.] Such diversity and inclusion training is critical to the proper functioning of the human resources office within the agency. Notably, the OIG found that the “data collected [for the OD&I’s MD-715 processes] were not validated against the employee electronic records stored in HR” during the audit period from FY 2011 through FY 2013. The lack of controls for diversity data found at the FRB by the OIG undermines the integrity of the agency’s diversity and inclusion programs, and may in fact be contrary to required EEOC reporting regulations.

Ultimately, the FRB’s implementation of the Section 342 requirements suggests to the Committee staff a tendency toward maintaining the status-quo with respect to workforce diversity efforts. “Although the FRB established the OD&I to include an OMWI function in response to the Dodd-Frank Act requirements, according to the OD&I official, the OD&I has not significantly modified its approach because these activities were already being covered prior to the enactment of the Dodd-Frank Act.”[51. Id. at 55.] Also, like several other agencies, as of the date of the OIG’s report, the OD&I had not finalized a formal set of diversity and inclusion standards, as required by Section 342.

[Author’s note: This blog covered some parts of these audit reports from the Inspectors General, especially that for the Board.]

Federal Financial Agency Report Number Internet Link Comment
Consumer Financial Protection Bureau Audit report 2015-MO-C-002 http://oig.federalreserve.gov/reports/cfpb-diversity-inclusion-mar2015.pdf American Banker article about racial disparities of CFPB staff evaluations.
Department of the Treasury, Office of the Comptroller of the Currency OIG-15-017 http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-15-017.pdf
Federal Deposit Insurance Corporation Eval-15-001 http://www.fdicoig.gov/reports15/15-001EV.pdf
Federal Housing Finance Agency EVL-2015-003 http://fhfaoig.gov/Content/Files/EVL-2015-003.pdf
Federal Reserve Board Audit report 2015-MO-B-006 http://oig.federalreserve.gov/reports/board-diversity-inclusion-mar2015.pdf What is left out of the report is significant: Artis v. Bernanke (now Yellen). Also 12 U.S.C. 244 needs Congressional attention to ensure that Title 5 of the U.S. Code applies to the Board; the Board’s record-keeping on, and reporting of, its internal management is lax.
National Credit Union Administration OIG-14-09 http://www.ncua.gov/about/Leadership/CO/OIG/Documents/OIG201409EqualOpportunityDiversity.pdf Click for blog post on this report
Securities and Exchange Commission 528 http://www.sec.gov/oig/reportspubs/528.pdf Report is thorough, thoughtful, and well done.
Advertisements

U.S. Civil Service: Partnership for Public Service and Booz Allen Hamilton Propose Unfair, Inequitable Dick Grote Style “Rank and Yank” System for the Civil Service, despite Its Many Flaws

The second merit system principle (5 U.S.C. sec. 2301(b)) reads as follows and must guide any successful civil service reform proposal:

All employees and applicants for employment should receive fair and equitable treatment in all aspects of personnel management without regard to political affiliation, race, color, religion, national origin, sex, marital status, age, or handicapping condition, and with proper regard for their privacy and constitutional rights.

The website, Government Executive, published an article about a proposal from the Partnership for Public Service (PPS) and the federal contractor Booz Allen Hamilton (BAH) to reform the federal civil service in the United States. (See report at http://cdn.govexec.com/media/gbc/docs/pdfs_edit/040114e1.pdf.) In short, PPS and BAH propose an inhumane and cruel solution, rank and yank, (contrary to the second merit system principle)– wrapped up in a colorful PDF document and poor, vague writing–that must be rejected totally.

I continue to be amazed that a system that caused organizational failure (Enron) or organizational disarray and destruction of innovation in a high-tech company (Microsoft) continues to be seen as a positive cure-all solution. Any proposal that seeks to enrich few people at the cost of the many is an insult to the democratic form of government that governs the country; how ironic that such an undemocratic proposal is fashioned for the United States government’s civil service.

Among the various proposals was a stunning one–a rank and yank system. (Emphasis, below, mine.)

Problem seen by PPS & BAH: Rigid policies that were designed to encourage long-term tenure and internal equity, for example, are now a burden on a government that needs to encourage flexibility and innovation to meet rapidly changing and difficult challenges. (Page 8, second column, second full paragraph of PPS & BAH report.)

Their solution–a rank-and-yank style system: With a credible performance management system in place, our proposed system would eliminate tenure-based pay increases for managers and employees, and instead make pay progression within a particular salary band based strictly on performance—up to an occupation’s market rate for performance that meets expectations, and above that rate only for performance that exceeds expectations. Employees who fail to meet their performance expectations would not be eligible for a base pay increase until their performance improves to satisfactory levels. (Page 25, second column, second full paragraph of the PPS & BAH report.)

PPS and BAH rank-and-yank style system slightly differs from the full system proposed by Dick Grote in that it recommends no salary increase rather than direct firing. But curiously, with all of the vague and convoluted verbiage of the report, PPS and BAH do not say how this proposal will be paid for.

Given the reality of fixed salary budgets in government and a comment by Robert Tobias, consulted on the report, stating that the proposal will likely be budget neutral, I infer that the small amount of so-called top performers will be enriched at the impoverishment of the large remainder of the workforce (some of them suffering everlasting stagnant pay). This blatant inequity and unfairness, itself in violation of the merit principles the PPS & BAH report notes that it values (page 9), is likely the reason for the confusing writing in this part of the report. Given a flat salary pool, those designated as so-called poor performers would likely never get another increase while witnessing their paycheck’s economic power withering away as a result of inflation and an increasing cost of living.

Rank and yank, pay for performance, up or out, whatever it is called really works one way: Giving the managers the absolute power to sort the workforce (in secret), giving the employee little to no ability to participate or appeal the management decision. Twenty percent will be designated as the richly rewarded “top performers,” 70% will be designated as “vital” and yet receive little salary increase, and then 10% will be designated as poor performers, with no salary increase at all until they decide to quit or suffer with working hard for a salary that cannot keep up with their cost of living.

This cruel proposal must be subject to discussion of all consequences, with complete involvement of the public, in clear language and then rejected.

Third Way: Evaluating Group’s Document “Saving Social Security”; Proposal for Benefit Taxes on Higher-Income Seniors, Means-Testing Benefits Unacceptable

Having completed posting on the Third Way benefit-change proposals, I will now begin to evaluate the revenue-increase proposals.

First on the list is the idea to impose benefit taxes on higher-income seniors. Third Way proposes to reduce benefits on this group and then turns around and taxes the all benefits above $50,000. I don’t see anything wrong with the current system.

Social Security is not a welfare program should not be adjusted to become one. The same response is true for the “idea” of means testing benefits—no. This move would be a sure way to diminish confidence in the program and turn it into a welfare program, which it is not. If a person pays into the Social Security program, they should receive proceeds from the program. If outside income exceeds $34,000 (or $44,000 for couples), that amount would be taxable under the current system.

Third Way: Evaluating Group’s Document “Saving Social Security”; Proposal to Raise Retirement Age Also Denies the Fact of Aging

As I wrote in the previous post, Third Way advocates working up to 70. I stated previously that people should enjoy life activities before the hardships of aging set in.

In the Washington Post today, yet another reason why additional years of work should not be so forcefully advocated.

Many industries find themselves in a quandary. They often need older workers for their expertise, yet they also may need to accommodate their physical disabilities and their desire for more flexible schedules. And as workers stay on the job longer, they may need training in new technologies or work procedures.

In addition, the whole idea is to transfer the knowledge of the present working generation to the generations behind them. This article indicates that that effort is not happening, and only bad results can occur because of it.

Third Way: Evaluating Group’s Document “Saving Social Security”; Proposal for Work Rewards for Seniors Provides for an Unacceptable FICA Exemption

Continuing with the evaluation of the Third Way proposal for Social Security (with the awareness that the Joint Commission on Deficit Reduction is set to begin work soon), this post evaluates the Work Rewards for Seniors plan. Third Way proposes that senior citizens who work beyond a certain age should stop paying Federal Insurance Contributions Act (FICA) taxes. Third Way acknowledges a reduction of FICA revenue but assert that the proposal would produce savings sufficient to make up for the revenue loss.

  • I think that there should not be a cutoff for FICA. As long as you earn income, you pay into the Social Security system. That expectation began at the person’s first wage-earning job and continues that way until a person stops working for wages.
  • In addition, Third Way’s proposal causes problems when Social Security beneficiaries are not contributing to the Social Security system (from which the beneficiary is receiving funds).

Deficit Committee: House Minority Leader Selects Members for the Panel; Possible the Leadership Will Work Secretly to Drop Plan for Final Consideration

House Minority Leader Nancy Pelosi selected Reps. Xavier Becerra, James Clyburn, and Chris Van Hollen for the congressional Deficit Committee.

I think given the composition of the committee (the leadership selected their representatives to the panel), if it is to work the leadership will have to continue their talks with the President in secret. This way they could work on a “fait accompli” plan for consideration of the so-called super-committee. The last thing any leader would want is for their subordinates to come up with a passable plan when the leadership could not.

I further think the leadership will develop the plan and drop it to the committees as stipulated in the Budget Control Act.

Joint Select Committee on Deficit Reduction

Selections of Senator Harry Reid, Senate Majority Leader

Nominee

Net Worth (2009)

Sen. Max Baucus (D-MT) $13,013 to $204,000
Sen. John Kerry (D-MA) $182,755,534 to $294,869,059
Sen. Patty Murray (D-WA) $449,017 to $1,185,000

Source: www.opensecrets.org.

Selections of Senator Mitch McConnell, Senate Minority Leader

Nominee

Net Worth (2009)

Sen. Jon Kyl (R-AZ) $519,090 to $746,082
Sen. Rob Portman (R-OH) $5,544,075 to $17,468,999
Sen. Pat Toomey (R-PA) $1,770,062 to $4,900,999

Source:  www.opensecrets.org.

Selections of House Speaker John Boehner

Nominee

Net Worth (2009)

Rep. Dave Camp (R-MI) $2,966,100 to $10,515,000
Rep. Jeb Hensarling (R-TX) $928,025 to $2,270,000
Rep. Fred Upton (R-MI) $7,010,173 to $25,651,000

Source:  www.opensecrets.org.

Selections of Nancy Pelosi, House Minority Leader

Nominee

Net Worth (2009)

Rep. Xavier Becerra (D-CA) $100,054 to $1,424,999
Rep. James Clyburn (D-SC) $212,010 to $582,000
Rep. Chris Van Hollen (D-MD) $148,007 to $445,000

Source:  www.opensecrets.org.

Deficit Committee: Senator Mitch McConnell and Speaker John Boehner Select Additional Members for the Committee

The principals (Sen. Harry Reid, Sen. Mitch McConnell, Speaker John Boehner, and Rep. Nancy Pelosi) could not reach an agreement with their discussions with the President. I do not expect their selectees will find one (unless proposed, approved, and submitted to the so-called super-committee (maybe on 10/14/11? (see BCA section 401(a)(3)(A)(ii)).

The number of millionaires who are on the congressional committee and would be subject to tax increases make me skeptical about the results of this super-committee.

Joint Select Committee on Deficit Reduction

Selections of Senator Harry Reid, Senate Majority Leader

Nominee

Net Worth (2009)

Sen. Max Baucus (D-MT) $13,013 to $204,000
Sen. John Kerry (D-MA) $182,755,534 to $294,869,059
Sen. Patty Murray (D-WA) $449,017 to $1,185,000

Source: www.opensecrets.org.

Selections of Senator Mitch McConnell, Senate Minority Leader

Nominee

Net Worth (2009)

Sen. Jon Kyl (R-AZ) $519,090 to $746,082
Sen. Rob Portman (R-OH) $5,544,075 to $17,468,999
Sen. Pat Toomey (R-PA) $1,770,062 to $4,900,999

Source:  www.opensecrets.org.

Selections of House Speaker John Boehner

Nominee

Net Worth (2009)

Rep. Dave Camp (R-MI) $2,966,100 to $10,515,000
Rep. Jeb Hensarling (R-TX) $928,025 to $2,270,000
Rep. Fred Upton (R-MI) $7,010,173 to $25,651,000

Source:  www.opensecrets.org.