Dismantling Diversity in Financial Regulation is a Step Backward for Financial Stability
By Cantrell Dumas, Director of Derivatives Policy
The population of the United States is more than 340 million people. Almost 60% are white, with 40% nonwhite, including about 20% Hispanic, 13% Black, and 6% Asian. More than 95% of those Americans have checking or savings accounts, credit or debit cards, loans of various types, or otherwise availed themselves of the products and services of the financial industry, much of which is regulated, supervised, examined, or policed by the federal financial regulatory agencies. There is no question that the country is diverse and that those who use and interact with the financial industry are diverse.
As we honor Black History Month, it's crucial to keep those facts in mind, including when we think about the recent actions by the Trump administration that have effectively dismantled many diversity and inclusion initiatives and may purge federal workers “that protect employees’ civil rights and others that investigate complaints of employment discrimination in the federal workplace.” These actions reverse the strides made toward diversity in society, the financial industry, and at the financial regulatory agencies. This risks perpetuating disparities that diversity programs are designed to address, including those that have systemic and structural causes.
Critics of diversity argue that such initiatives foster reverse discrimination and undermine merit-based systems. However, there’s evidence that diversity programs enhance organizational performance and inclusivity. For example, a 2022 McKinsey & Company report found that companies with greater gender and ethnic diversity are more likely to outperform their peers financially. Moreover, statistics from Korn Ferry show that 80% of the world’s most admired companies intentionally build diverse and inclusive teams to enhance performance and creativity. Research from Korn Ferry also indicates that teams designed with diversity in mind make better decisions 87% of the time compared to homogenous groups and are 70% more likely to break into new markets.
Given the diversity of the U.S. population and customer base, it should come as no surprise that diversity enhances performance. As billionaire businessman Mark Cuban put it, “We live in a country with very diverse demographics. In this era where trust of businesses can be hard to come by, people tend to connect more easily to people who are like them. Having a workforce that is diverse and representative of your stakeholders is good for business.”
Similarly, Ken Frazier, former CEO of Merck, emphasized that diversity is about "developing talent, measuring it in a fair way, and finding hidden talent and disadvantaged talent in a world where not everybody has an equal chance to exhibit their abilities."
This perspective underscores that diversity initiatives are not about preferential treatment but about ensuring that everyone is represented in all parts of American life, especially in the government that is supposed to be representative of all the American people. This should also ensure that everyone has an equal opportunity, regardless of their background.
Impact on Financial Regulatory Agencies
Dismantling diversity programs within federal financial regulatory agencies, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Office of the Comptroller of the Currency (OCC), Federal Reserve (Fed), and Federal Deposit Insurance Corporation (FDIC), threatens to undermine the fairness and effectiveness of financial oversight. These agencies play a crucial role in protecting investors, ensuring market stability, and regulating financial institutions—responsibilities that require diverse perspectives to address the needs of all Americans, not just those with privileged access to financial markets.
Without diversity and inclusion initiatives, financial regulatory agencies risk becoming less representative of the diverse populations they serve, which can lead to blind spots in policymaking and enforcement. Historically, financial crises and predatory practices have disproportionately harmed minority communities. Redlining, subprime lending, and discriminatory banking practices have long restricted access to fair financial services. Diverse workforces help agencies recognize and combat these injustices by fostering leadership that understands and prioritizes inclusive economic policies so that all Americans are represented and, thereby, ultimately seen and heard.
Moreover, diversity within these agencies strengthens their ability to detect and mitigate systemic risks. A homogenous leadership structure—where decision-making is concentrated among a narrow demographic—reduces the range of perspectives and expertise necessary to anticipate emerging threats. Research has shown that diverse teams are better at problem-solving, risk assessment, and innovation, which are essential qualities in financial regulation. By eliminating diversity and inclusion programs, the Trump administration is weakening the ability of these agencies to safeguard economic stability and protect vulnerable consumers.
Additionally, removing such initiatives sends a damaging message to historically underrepresented groups who aspire to careers in financial regulation. It suggests that these institutions are reverting to exclusionary practices, discouraging talented professionals from diverse backgrounds from entering public service. This not only limits opportunity but also diminishes the overall talent pool, ultimately making financial regulation less effective and our financial system less resilient.
The Bottom Line
Ensuring diversity in society, the financial industry, and at the financial regulatory agencies isn’t just about representation—it strengthens oversight, improves risk management, and promotes economic stability for all. Dismantling such programs is a step backward, but Black History Month reminds us that progress is achieved through persistence and advocacy. To build a fair financial system, we must continue to push for inclusive policies that reflect and serve the full diversity of America.