House finance diversity panel gets axed by new leadership

The new chairman of the U.S. House Financial Services Committee has decided to replace a panel that promoted industry diversity and inclusion with one overseeing digital assets. Now his Democratic colleagues are saying he has his priorities backward.

For the past four years, the House Committee on Financial Services had a Subcommittee on Diversity and Inclusion charged with getting large institutions like asset managers, banks and insurance companies to divulge sometimes unflattering numbers on the makeup of their C-suites, boardrooms and subcontractors. The subcommittee came to an end in January when it was not included on a list of panels formed by newly appointed Financial Services Chairman Patrick McHenry, a North Carolina Republican.

Its replacement, the Subcommittee on Digital Assets, Financial Technology and Inclusion, is in part responsible for “identifying best practices and policies that continue to strengthen diversity and inclusion in the digital asset ecosystem.” But most of its mission has to do with making sure cryptocurrencies and other digital assets are being regulated to prevent investor harm.

Still, according to rules McHenry put forward on Feb. 1 to kickstart the Financial Services Committee’s work this year, every subcommittee he oversees has freedom to review the industry’s “diversity and inclusion policies.”

With the new subcommittee on digital assets, he said, his goal is “to focus on a $1 trillion asset class that pre-the last financial crisis, didn’t exist.

 “It’s important that we have a specialized effort with this subcommittee with digital assets,” McHenry added. 

McHenry’s Democratic colleagues said they think that the House’s diversity and inclusion goals won’t be served under the new committee organization.

“The bottom line is that a diversity and inclusion strategy with no tangible goals, accountability measures, or a senior point of contact, cannot be expected to result in any significant impact,” said U.S. Rep. Maxine Waters, a California Democrat and McHenry’s immediate predecessor as House Finance chair, in an official statement.

McHenry couldn’t be reached for this article. 

Although the Subcommittee on Diversity and Inclusion wasn’t formed until 2019 and lasted barely four years, it had some major accomplishments to its credit. 

In March of 2021, Waters and her colleagues sent letters to 31 investment firms with assets over $400 billion to learn about their diversity numbers and policies. Not all the firms responded. But of those that did, their answers suggested that even though many of these large financial institutions had made public commitments to diversity, few had shown significant progress on that front. 

From 2016 to 2019, for instance, the proportion of these firms’ executive positions held by women went from 25% to 26.2%; those held by people of color went from 14.1% to 16.6%.

Diversity continues to be a struggle for the advisory industry. The Certified Financial Planner Board of Standards — which sets the criteria for who can deem themselves certified planners — announced on Jan. 19 that 8,715 of its more than 95,000 certificate holders in 2022 were “racially and ethnically diverse.” The number for women advisors was slightly better — 22,446, or 23.6% of the total.

The subcommittee was less successful on the legislative front. Members tried to introduce various bills that would have required financial firms to divulge diversity and inclusion data at regular intervals. 

But the bills struggled to gain a foothold during the subcommittee’s first two years of existence, when much of the national agenda was still being set by the Trump Administration. And they fared little better after President Joe Biden took office, whose initial priorities were to fight the COVID-19 pandemic and pass a bill to rebuild the country’s infrastructure.

The former chair of the diversity and inclusion subcommittee — Rep. Joyce Beatty, an Ohio Democrat — was equally critical of McHenry’s decision to discontinue the diversity and inclusion subcommittee.

“If my Republican colleagues were truly committed to strengthening diversity and inclusion, they wouldn’t have eliminated the Diversity and Inclusion Subcommittee that has made tremendous national progress and moved the needle forward to increase diversity in financial institutions,” she said in a statement.