It is nothing but the attempt to institutionalize corruption in the US, ensuring that the Fed will become a servant of politically correct appointees who will ensure that any Fed lending meets politically determined socially and politically correct lending practices.
If this passes, it means the end of the Fed and the degradation of the American banking system to serve the "needs" of the Democratic Party (and you can bet that once political appointees are in there, they'll be there for life to "ensure their independence," meaning that the looting will continue.
Having recently lived through a financial mania and panic caused in part by political pressure for "affordable housing," Congress will now order regulators to allocate credit by race and gender. Isn't the point of this financial reform supposed to be to make regulators better judges of systemic risks, which means focusing on financial safety and soundness? If the Waters provision passes, federal regulators will have to put racial and gender lending at the top of their watch list when they do their checks on the banks and hedge funds they are regulating.
That way lies madness.
It is also symptomatic of the Democratic Party at this point in time. After destroying California, they're looking for additional targets to screw up.
The Fed is being told to lie back and enjoy it:
Fed regional presidents are often the main proponents of tight monetary policy. The presence of a diversity czar is one way Congress and the White House can intimidate these regional presidents to go along with the policies they favor. No Fed bank president will want to take the risk of being hauled before Congress to answer a report that the banks under his jurisdiction aren't racially or gender sensitive enough in their lending.
This political sway is already clear from how meekly the Fed as an institution is bowing to the Waters provision. The Senate bill doesn't have the same provision, so it could be removed in the House-Senate conference that begins this week. But we're told that Fed officials in Washington have told the regional banks to keep quiet because it can't be stopped and Ms. Waters and the House might punish them if they try. In other words, the political intimidation is already obvious even before the provision becomes law.
The joke here, as well, is that the Democrats set up a straw man to facilitate this:
Blame for this Congressional intrusion goes to Treasury Secretary Tim Geithner and former Goldman Sachs executive Stephen Friedman for orchestrating the selection of former Goldman economist William Dudley as Mr. Geithner's replacement at the New York Fed.
Mr. Friedman chaired the search committee to replace Mr. Geithner even as he increased his ownership of Goldman shares. Though this violated Fed rules, Fed Vice Chairman Donald Kohn and the Board of Governors gave Mr. Friedman a conflict-of-interest waiver. Congress has now seized on this to justify putting the New York Fed chief on a Washington political leash.
This is political thuggery at its most subtle: it remains political thuggery.
Welcome to Chicago politics, folks: just put your wallets, jewelry and watches into the bag and no one gets hurt.