Federal law requires Minneapolis Fed to diversify workforce. Could Trump’s DEI order change that?

A provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act could come under scrutiny following President Donald Trump’s executive orders targeting diversity, equity and inclusion (DEI) efforts in federal hiring and contracting.

The 2010 law, intended to expand oversight and protect consumers after the 2008 financial crisis, required the Federal Reserve and other government financial agencies to each establish an Office of Minority and Women Inclusion “that shall be responsible for all matters of the agency relating to diversity in management, employment and business activities.”

Now, federal agencies are scrambling to reassess their diversity work after Trump’s slew of executive orders since taking office last month included eliminating federal DEI offices and positions, barring the use of DEI in federal hiring and contracting and rescinding multiple DEI-related executive actions from former President Joe Biden.

“Like others, we’re reviewing the orders and associated details as they’re made available,” Fed Chairman Jerome Powell said at a news conference this past Wednesday. “And as has been our practice over many administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law.”

The Fed Board of Governors has an Office of Minority and Women Inclusion, as do each of the 12 regional banks, including in Minneapolis. Dodd-Frank requires these offices, which submit annual reports to Congress, to work to diversify the workforces of their respective banks; boost participation of people of color- and women-owned businesses in programs and contracts; and assess diversity policies and practices of entities they regulate.

“A lot of that realization that people of color proportionally were hit worse by the lending crisis was brought to light” in lawsuits stemming from the financial crisis, said Kim Vu-Dinh, a professor at Mitchell Hamline School of Law. “So it’s not particularly surprising to folks who had been following those lawsuits that this was an issue and something that Dodd-Frank tried to address.”

The Minneapolis Fed established its Office of Minority and Women Inclusion in January 2011. In its 2023 Congressional report, the most recent available, the bank reported its workforce was about one-third people of color (POC) and half women. Of $63.6 million in annual procurement spending, nearly $21 million went to POC- and women-owned businesses.

“We have placed our focus on key initiatives in this critical area as we move ahead,” Minneapolis Fed President Neel Kashkari and Office of Minority and Women Inclusion Director Patience Ferguson wrote in the report’s introduction. “Our commitment is to ensure that the Bank is an environment where inclusion is embraced at every level and that all employees are respected and valued.”

A Minneapolis Fed spokeswoman declined to comment on how Trump’s orders would affect DEI efforts at the bank.

Executive orders do not override federal law. And because the Fed is an independent agency — and workers at its regional banks are not federal employees — the president has limited control of its actions.

“A lot of people think that Trump can’t fire the head of the Federal Reserve. As a corollary to that, you can’t really tell the Federal Reserve what to do and not to do,” said Steve Quinlivan, a partner at Stinson LLP. “The Federal Reserve has to follow the law, and if it wants to have an Office of Minority and Women Inclusion as required by that, it should do so.”

Still, he said, “the extent to which Trump can order independent agencies such as the [Securities and Exchange Commission] or the Federal Reserve Board is somewhat open to question.”

There has already been tension between the Fed and the White House due to interest rates, which the Fed raised and held at a 22-year high in an effort to bring inflation under control. Trump has been openly critical of Powell, whom he appointed during his first term, and said he would demand rate cuts during this term.

The Federal Open Market Committee (FOMC) started making cuts in September, lowering the federal funds rate to 4.25 to 4.5%. Trump lashed out when the committee opted in January to leave rates unchanged, writing on his Truth Social platform, “if the Fed had spent less time on DEI, gender ideology, ‘green’ energy and fake climate change, inflation would never have been a problem.”

The president has appeared to change his tune, though, saying Sunday the Fed was right to hold rates steady.

When it comes to DEI, the courts will likely decide the impact of Trump’s executive orders, said Peter Larsen, an assistant law professor at Mitchell Hamline.

“My reading of it would be: The president does not have the authority, at least within that narrow conception of DEI within the Dodd-Frank Act, to modify or to eliminate any DEI requirements,” he said. “When it comes to the executive branch, though, and a lot of these administrative agencies, will Trump’s order be able to survive scrutiny? Very likely.”

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