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 !