Inside Financial Services

No, The CFPB Doesn’t Discriminate Against Its Own Employees . . .

. . . even though the "disparate impact" numbers say that it does. So why use that same bogus measure to rate the banks?

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The quotation of the day-and maybe of the year: “The level of hypocrisy at this agency is shocking,” said a current [Consumer Finance Protection Bureau] employee who spoke on condition of anonymity. “If it was a lender and had similar statistics, it would be written up, immediately referred to the Justice Department, sued and publicly shamed.” [Emph. gleefully added.] What statistics exactly are causing all the fuss, you ask? Why, the CFPB’s staff evaluation numbers–which on their face reveal the agency to be a hotbed of racial discrimination. In particular, on a 1 to 5 scale (5 being best): White employees scored markedly higher than minorities. Overall, 74.6% of whites received ratings of 4 or 5, versus 65.5% of Asians,65.2% of Hispanics and 57.6% of African-Americans, according to an internal CFPB report obtained by American Banker. The discrepancies were even greater at the ratings range’s extremes. At the top, one-fifth of white employees, or 20.7%,received a 5-and were dubbed “role models”-compared with 10.5% of African-Americans and 9.1% of Hispanics. [Emph.added.] So, for the record, if you’re a white CFPB employee you’re twice as likely to get a top performance rating-and the pay and promotion opportunities that go with that-than you would if you’re black or Hispanic. It gets worse. More from the Banker: In contrast, a relatively high proportion of minority employees received 3 ratings-the lowest grade given out in large numbers. In total, a rating of 3 was given to 42.4% of African-Americans, 34.5% of Asians, 34.8% of Hispanics and 24.4% of Caucasians. [Emph. added.] Almost twice as many African-Americans get saddled with 3s than do whites! I somehow doubt this is what Elizabeth Warren had in mind. Here she dreams up an agency designed to stick up for the little guy, and inadvertently resurrects Jim Crow instead! But hang on, you’re saying. These numbers can’t be taken at face value as evidence of racial discrimination. That’s way too simplistic. You need to adjust them for real-world factors. An individual’s years of experience, say, or his or her educational level. If you make allowances for things like that, it’s likely the evidence of racial discrimination by the CFPB would fade away, and the performance differences explained by reasonable, relevant factors. You’re right of course. Except that-and you can see where I’m headed with this-that’s not how the CFPB plans to evaluate banks for evidence they might be discriminating against minority borrowers. Rather, the agency will simply rely on “disparate impact” effect (i.e. the raw, unadjusted numbers). So, say, if an institution is turning down black applicants at a higher rate than whites, forgetting about adjusting for FICO scores, incomes, or anything else that’s actually relevant, that institution will be assumed to be engaging in discriminatory lending. Which is of course ridiculous-and why the American Banker story this morning was such a delightful way to start my day. I’m eager to hear the agency’s top honchos argue that they’re not engaged in systematic racial discrimination against their own employees even though, according to the exact same measurement methodology the CFPB plans to use against the banks, that is precisely what’s happening. If it’s valid enough to apply to the banks, it’s valid enough to apply to the people who run the CFPB. That anonymous agency employee is right. The level of hypocrisy is shocking.

What do you think? Let me know !

11 Responses to “No, The CFPB Doesn’t Discriminate Against Its Own Employees . . .”

  1. Milkweed

    When it’s pointed out to you that things like FICO scores and incomes entirely account for the difference in approvals and regulators and Justice department sue banks anyway, it’s extortion not discrimination and the people responsible for the extortion (Eric Holder) should be the ones defending themselves in court. WTF is wrong with this country??????????????????

  2. jsc173

    I believe I’ve commented before about CFPB. I interviewed there a couple of years ago and met a half dozen or so of the top leadership group. One white lady, one minority and the rest were the typical Washington “white guys.”

    The place reflects the hiring policies initially. When it was started I was told the top hiring managers were given carte blanche to hire the “best” they could find and did not have to comply with the full gamut of governmental HR rules. They were given a lot of freedom to “pay what they had to pay” to attract people and did not have to use the normal hiring practices.

    Perhaps that has something to so with this result. The “old boy” network resulted in a lot of people being hired who probably would not have survived the normal government hiring practices. For certain, people are being paid much more than they would be earning at other agencies and I suspect (as this seems to indicate) they are handing out salary bumps to their “buddies.”

    As you say, if this was one of the major banks that CFPB regulates, this wouldn’t happen without litigation occurring.

    Having said all this, no surprise to me. A result that could have been expected.

  3. Lender reader

    Fun reading, but do you even have a general knowledge of the factors used? Measures absolutely adjusted for FICO and/ or clearly identified risk factors. Don’t get me wrong, I agree that the CFPB is doing pure damage, but at least try to address factually.

  4. Milkweed

    http://finance.yahoo.com/news/banks-fight-back-vs-holder-224900906.html

    Lender reader, I’m not sure if you just misread Tom’s article or you are suggesting that factors like FICO scores are actually factored into disparate impact however according to the article linked above, the banks don’t think they are. Common sense would also suggest in this day and age it’s hard to imagine any significant bank believing they could get away with institutionalized discrimination even if they were inclined to engage in it.

  5. Milkweed

    http://finance.yahoo.com/news/banks-fight-back-vs-holder-224900906.html

    Lender reader, I’m not sure if you just misread Tom’s article or you are suggesting that factors like FICO scores are actually factored into disparate impact however according to the article linked above, the banks don’t think they are. Common sense would also suggest in this day and age it’s hard to imagine any significant bank believing they could get away with institutionalized discrimination even if they were inclined to engage in it.

  6. FSDA

    One might try to apply GAAP and GAAS to governmental accounting and be even more shocked.

  7. PMM

    Tom, Really! Tell me that you are surprised !!!!!! PMM

  8. BobE

    There is no concept called “shame” in Washington.

  9. Milkweed

    http://finance.yahoo.com/news/banks-fight-back-vs-holder-224900906.html

    Lender reader, I’m not sure if you just misread Tom’s article or you are suggesting that factors like FICO scores are actually factored into disparate impact however according to the article linked above, the banks don’t think they are. Common sense would also suggest in this day and age it’s hard to imagine any significant bank believing they could get away with institutionalized discrimination even if they were inclined to engage in it.

  10. Anonymous

    Tom I love the blunt way you tell the truth.

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