Federal Financial Regulatory Agencies: Financial Services Democrats Receive Responses from Agencies; Seek Further Action and Commitment for Measurable Results

In a previous post, I discussed the publication of a report by the U.S. House of Representatives’ Democrats (Representative Maxine Waters (D-Calif.), Representative Al Green (D-Tx.), and members of the Tri-Caucus) on the diversity and inclusion issues within the federal financial agencies.

Agency Date submitted Link Comment
Consumer Financial Protection Bureau December 7, 2015 http://democrats.financialservices.house.gov/uploadedfiles/2015.18.25_diversity_report_and_reforms_agency_responses_final.pdf
Federal Deposit Insurance Corporation December 7, 2015
Federal Housing Finance Agency December 7, 2015
Federal Reserve Board November 25, 2015 and February 8, 2016 Detailed letter (Feb. 8, 2016) submitted 2 days before the Monetary Policy Report hearing (Feb. 10, 2016).
National Credit Union Administration December 7, 2015
Office of the Comptroller of the Currency December 8, 2015
Securities and Exchange Commission December 9, 2015

According to a press release issued on January 8, 2016, the Democrats received responses from the federal financial regulatory agencies. Waters and members of the Tri-Caucus appreciated the responses but seek further action to ensure demonstrated commitment and action on the part of these agencies.

Federal Financial Agency Report Number Internet Link Comment
Consumer Financial Protection Bureau Audit report 2015-MO-C-002 http://oig.federalreserve.gov/reports/cfpb-diversity-inclusion-mar2015.pdf American Banker article about racial disparities of CFPB staff evaluations.
Department of the Treasury, Office of the Comptroller of the Currency OIG-15-017 http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-15-017.pdf
Federal Deposit Insurance Corporation Eval-15-001 http://www.fdicoig.gov/reports15/15-001EV.pdf
Federal Housing Finance Agency EVL-2015-003 http://fhfaoig.gov/Content/Files/EVL-2015-003.pdf
Federal Reserve Board Audit report 2015-MO-B-006 http://oig.federalreserve.gov/reports/board-diversity-inclusion-mar2015.pdf What is left out of the report is significant: Artis v. Bernanke (now Yellen). Also 12 U.S.C. 244 needs Congressional attention to ensure that Title 5 of the U.S. Code applies to the Board; the Board’s record-keeping on, and reporting of, its internal management is lax.
National Credit Union Administration OIG-14-09 http://www.ncua.gov/about/Leadership/CO/OIG/Documents/OIG201409EqualOpportunityDiversity.pdf Click for blog post on this report
Securities and Exchange Commission 528 http://www.sec.gov/oig/reportspubs/528.pdf Report is thorough, thoughtful, and well done.

In particular, Chair Janet Yellen stated in the Fed’s letter that the Fed had already begun acting on recommendations from its Inspector General.

[Note: Key issues to monitor PMR monitoring, discussions with OMWI director. Responses to these recommendations were opaque.]

Author’s note: Other posts relating to the Federal Reserve Board on this issue follow.

https://alexwdc.wordpress.com/2015/11/27/federal-reserve-board-h-2-release-for-week-ending-november-21-2015-a-brief-comment-on-diversity-practices-of-the-board/

https://alexwdc.wordpress.com/2015/11/13/federal-reserve-board-h-2-release-for-week-ending-november-7-2015-background-on-the-boards-omwi-program/

https://alexwdc.wordpress.com/2015/12/11/federal-reserve-board-walter-t-charlton-counsel-for-cynthia-artis-artis-v-bernanke-on-c-span-in-2002-a-note-onjohn-roberts-and-antonin-scalia/

https://alexwdc.wordpress.com/2015/10/29/federal-reserve-board-h-2-release-for-week-ending-october-24-2015-boards-ig-identifies-major-management-challenges/

https://alexwdc.wordpress.com/2015/07/22/federal-reserve-board-long-running-employment-discrimination-case-artis-v-bernanke-yellen-dismissed-with-prejudice-length-of-case-offends-conscience/

https://alexwdc.wordpress.com/2016/02/11/federal-reserve-board-legal-cases-against-the-board-2/

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Civil Service Reform: Current System Not Working; Move to New System Unwise

There are calls to reform the civil service (Partnership for Public Service), but the existing civil service is not functioning properly. A number of events urges better implementation of the current civil service and caution about further strengthening authority to an unaccountable management class.

3893340-handless-facepalm

Below is a table of several topics that demonstrate that much needs to be improved under the current rules before thinking of moving to new, untested civil service system.

Civil Service Event Coverage Comment
Artis v. Bernanke, employment discrimination case at the Federal Reserve Board https://alexwdc.wordpress.com/?s=artis 18 year duration for this case represents systemic failure.
Use of forced distribution at the Federal Reserve Board https://alexwdc.wordpress.com/?s=federal+reserve
Partnership of Public Service argument for civil service reform https://alexwdc.wordpress.com/?s=partnership Group envisions economic punishment of no raises (or self-firing) in its format for forced distribution.
Merit Systems Protection Board and methods to address so-called poor performance Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2015/08/06/the-top-five-ways-federal-managers-fail-to-fire-their-low-performers/ Poor performance lives in ambiguity; MSPB does not even attempt to define the term used to damage or end careers.
Commerce GS-15 manager alleged of several incidents of misconduct Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2015/09/02/commerce-official-let-her-kids-watch-porn-on-federal-computers-then-told-investigators-she-saw-nothing-wrong-with-it/ Commerce Office of Inspector General report: https://www.oig.doc.gov/OIGPublications/OIG-14-0153.pdf
Fired civil servant who filed complaints with newspaper, his congressional representative and staff, and nonprofit group, shoots and kills security guard and himself Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2015/08/27/federal-employees-and-contractors-face-danger-even-death-just-doing-their-jobs/
Diversity and inclusion issues at the federal financial regulatory agencies https://alexwdc.wordpress.com/?s=diversity

https://alexwdc.wordpress.com/?s=cfpb

In general, the situation is grim.
Non-civil-service event but informative–abusive work environment at Amazon.com. https://alexwdc.wordpress.com/?s=amazon

The New York Times: http://nyti.ms/1ISY0xv

The New York Times: http://nyti.ms/1zoKGPy (Supreme Court rules that Amazon does not have to pay employees for time spent in warehouse security lines after end of shift.)

Salon: http://www.salon.com/2014/02/23/worse_than_wal_mart_amazons_sick_brutality_and_secret_history_of_ruthlessly_intimidating_workers/

Eye-opening articles

CFPB: House Committee Investigates Allegations of Discrimination; Views Differ on Motivations for Hearings–Destroy CFPB or Address Discrimination

On June 25, 2015, the oversight and investigations subcommittee of the House of Representatives’ Committee on Financial Services held a fifth hearing about discrimination at the Consumer Financial Protection Bureau (CFPB). The hearing was titled “Examining Continuing Allegations of Discrimination and Retaliation at the Consumer Financial Protection Bureau.” But this was no mere subcommittee hearing as both the chairman and ranking member of the full Committee were also present.

Hearings of the House Financial Services Committee, Oversight and Investigations Subcommittee
Date Title of Hearing Witnesses Hearing Report Number
4/2/2014 Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau Ms. Angela Martin and Ms. Misty Raucci 113-72
5/21/2014 Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, part 2 Mr. Benjamin Konop and Ms. Liza Strong 113-81
6/18/2014 Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, part 3 Mr. Ali Naraghi and Mr. Kevin Williams 113-85
7/30/2014 Allegations of Discrimination and Retaliation and the CFPB Management Culture The Honorable Richard Cordray 113-96
6/25/2015 Examining Continuing Allegations of Discrimination and Retaliation at the Consumer Financial Protection Bureau Mr. Robert Cauldwell and Ms. Florine Williams

While the context of the hearing was about the allegations of discrimination, the issue became clouded with the question whether the CFPB should continue to exist. Because of this entanglement, the Democrats were concerned that complaints of discrimination (which the Democratic side holds as serious in their own right) was being used by the GOP majority as a method to undermine the agency, which the GOP would favor.

Do you think that the majority of the members on the opposite side of the aisle are more concerned about discrimination than this side of the aisle?” she [Rep. Maxine Waters (D-Calif.)] asked. “Just take a look.”

Waters’s comment drew audible murmurs from Reps. Mick Mulvaney (R-S.C.), Ann Wagner (R-Mo.) and Mia Love (R-Utah), who is the first black Republican woman elected in Congress.

“Oh my gosh,” Love said. “Wow.”

“Yeah, you can, ‘Wow’ all you want,” said Waters. “Discrimination issues — at least on this side of the aisle — are taken seriously. … [But] this is a political fight inside the committee.”

Additionally, only the minority members of the Committee have asked the Offices of Inspectors General for the federal financial regulatory agencies to examine their respective agencies diversity and inclusion practices. Yet, as of the date of this post, there have been no hearings held on those reports.

Federal Financial Agency Report Number Internet Link Comment
Consumer Financial Protection Bureau Audit report 2015-MO-C-002 http://oig.federalreserve.gov/reports/cfpb-diversity-inclusion-mar2015.pdf American Banker article about racial disparities of CFPB staff evaluations.
Department of the Treasury, Office of the Comptroller of the Currency OIG-15-017 http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-15-017.pdf
Federal Deposit Insurance Corporation Eval-15-001 http://www.fdicoig.gov/reports15/15-001EV.pdf
Federal Housing Finance Agency EVL-2015-003 http://fhfaoig.gov/Content/Files/EVL-2015-003.pdf
Federal Reserve Board Audit report 2015-MO-B-006 http://oig.federalreserve.gov/reports/board-diversity-inclusion-mar2015.pdf What is left out of the report is significant: Artis v. Bernanke (now Yellen). Also 12 U.S.C. 244 needs Congressional attention to ensure that Title 5 of the U.S. Code applies to the Board; the Board’s record-keeping on, and reporting of, its internal management is lax.
National Credit Union Administration OIG-14-09 http://www.ncua.gov/about/Leadership/CO/OIG/Documents/OIG201409EqualOpportunityDiversity.pdf Click for blog post on this report
Securities and Exchange Commission 528 http://www.sec.gov/oig/reportspubs/528.pdf Report is thorough, thoughtful, and well done.

As for the testimony, Ms. Florine Williams, senior equal employment specialist, in the CFPB’s Office of Civil Rights, had to file a discrimination complaint herself about her mistreatment by her supervisor.

Also testifying was Mr. Robert Cauldwell, president of the National Treasury Employees Union, chapter 335, and examiner at the CFPB. Mr. Cauldwell submitted testimony about the bad management culture at the CFPB. However, there were questions from the dais about whether he had complaints of discrimination filed against him. In addition, there were questions about why he did not speak for the NTEU.

Diversity and Inclusion: Congressional Democrats Deeply Disappointed with Federal Financial Regulatory Agencies Joint Statement; Statement Said to be Ambiguous, Opaque, and Weak

Two Democratic members of the Committee on Financial Services in the House of Representatives (Committee) issued a press release expressing concerns with a joint statement authored by the federal financial regulatory agencies.

According to the press release, Representative Maxine Waters (D-Calif.), ranking member of the Committee and chief architect of section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), P.L. 111-203, and Representative Joyce Beatty (D-Ohio), who oversees the implementation of section 342 of Dodd-Frank, stated that they were deeply disappointed with the structure and scope of the joint statement.

The reasons for the disappointment, as presented in the press release and based on a 2014 letter from the Congressional Black Caucus to participating federal agencies, are as follows:

  • The failure of the joint standards to bring transparency to the financial services industry, which, the authors stated, has a long history of failing to promote diversity in its workforce.
  • The final statement is said to be ambiguous and “does not establish uniform criteria to assess workforce and supplier diversity practices.
  • The final statement does not require all regulated entities to collect and report data on workforce and supplier diversity practices. (The press release explains that section 342 of Dodd-Frank provided authority for required data collection.)

Diversity and Inclusion: Federal Financial Regulatory Agencies Issue Final Statement on Assessment of Diversity & Inclusion Practices at Regulated Entities

On June 10, 2015, the federal financial agencies issued a final inter-agency policy statement establishing joint standards for assessing the diversity practices and practices regulated by the agencies. See 80 Fed. Reg. 33016 (June 10, 2015), effective on the date of publication (the agencies are soliciting comments on the collection of information). These standards were established by section 324 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (12 U.S.C. section 5452).

The federal financial agencies are the following–the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Bureau of Consumer Financial Protection, and the Securities and Exchange Commission. Congressional Democrats requested that these agencies submit internal agency assessments of diversity and inclusion.

Federal Financial Agency Report Number Internet Link Comment
Consumer Financial Protection Bureau Audit report 2015-MO-C-002 http://oig.federalreserve.gov/reports/cfpb-diversity-inclusion-mar2015.pdf American Banker article about racial disparities of CFPB staff evaluations.
Department of the Treasury, Office of the Comptroller of the Currency OIG-15-017 http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-15-017.pdf
Federal Deposit Insurance Corporation Eval-15-001 http://www.fdicoig.gov/reports15/15-001EV.pdf
Federal Housing Finance Agency EVL-2015-003 http://fhfaoig.gov/Content/Files/EVL-2015-003.pdf
Federal Reserve Board Audit report 2015-MO-B-006 http://oig.federalreserve.gov/reports/board-diversity-inclusion-mar2015.pdf What is left out of the report is significant: Artis v. Bernanke (now Yellen). Also 12 U.S.C. 244 needs Congressional attention to ensure that Title 5 of the U.S. Code applies to the Board; the Board’s record-keeping on, and reporting of, its internal management is lax.
National Credit Union Administration OIG-14-09 http://www.ncua.gov/about/Leadership/CO/OIG/Documents/OIG201409EqualOpportunityDiversity.pdf Click for blog post on this report
Securities and Exchange Commission 528 http://www.sec.gov/oig/reportspubs/528.pdf Report is thorough, thoughtful, and well done.

Because several of the financial agencies have spotty records in diversity and inclusion, it is curious to see this final statement being published for the financial services industry, which may have similar problems. Nevertheless, it is important to have the standards published and the information recorded and published for public review. Oversight of the data that are submitted is essential, given the results from the federal financial regulatory agencies. [For example, it is interesting to see the resistance to diversity and inclusion data collection by the Board’s response through Don Hammond, chief operating officer for the Board. The Board’s history on diversity and inclusion gives an observer pause, and improvement of the Board’s compliance on these issues is expected and necessary.]

In reading the preamble of the final statement, some commentators stated that the then-proposed standards amounted to “quotas” or an additional compliance burden. However, without the data being collected, there are structural problems facing minorities and women in the financial services industry as well in other areas of the society in the United States.

Without these persistent issues, these commentators would have a point. But since the issues still exist in society, within the financial services sector (with existing practices before June 10, 2015), and especially within the federal financial regulatory agencies, data are needed for study. The mere collection and publication of data imposes no requirements for hiring goals; rather, the collection of data only reflects the practices of the collecting organization, which should be confident that its practices are fair and equitable and that that confidence should be demonstrated in its data.