Trump official's past racial comments spark revolt at agency

Trump official's past racial comments spark revolt at agency
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Controversial blog posts written by a senior Consumer Financial Protection Bureau (CFPB) official have plunged the already divided agency into a bitter battle over its mission and handling of racial discrimination.

Eric Blankenstein, CFPB’s director of supervision, enforcement and fair lending, has come under fire for anonymous blog posts he wrote in 2004 dismissing hate crimes and questioning whether using the n-word was racist.

The discovery of Blankenstein’s posts sparked backlash among Obama-era officials at the agency who say he’s unfit to oversee CFPB's efforts to curb racial discrimination.

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Top bureau managers and CFPB union representatives have called on acting Director Mick MulvaneyJohn (Mick) Michael MulvaneySondland notified Trump officials of investigation push ahead of Ukraine call: report Schiff knocks Mulvaney over failure to testify in impeachment probe Lawmakers skeptical of progress on spending deal as wall battle looms MORE to fire Blankenstein and abandon a planned reorganization of the agency that would give him more authority over fair lending cases.

The anger over Blankenstein’s blog posts has spurred a reckoning on race relations for the CFPB. The agency was intended to help prevent discrimination in lending, but for critics it has fallen far short.

“People are pretty dumbstruck at the moment,” a senior CFPB official told The Hill. “This is forcing people to confront what should the bureau be doing in regards to race and [that] the bureau is not a place where we haven't had our own problems in the past.”

Blankenstein is one of two top CFPB officials leading the bureau’s policing of abusive and discriminatory practices in lending. He joined the CFPB in December and was elevated to a senior position in February, chosen by Mulvaney to curb the bureau’s historically aggressive prosecution of banks and lenders suspected of wrongdoing.

Those moves to revamp the agency have sparked frustration over Obama-era staffers, who have had sharp disagreements with Blankenstein over policy. But those tensions generally bubbled below the surface, until last week when they exploded into public view.

The Washington Post last Wednesday revealed the blog posts Blankenstein had written in 2004 dismissing most hate crimes as hoaxes and questioning whether using the n-word was inherently racist.

The report quickly sparked a rebellion within the agency.

Patrice Ficklin, director of the CFPB fair lending office, said she could no longer trust Blankenstein to carry out the bureau’s anti-discrimination mission. She asked Mulvaney to halt a planned reorganization that would strip her office of enforcement power to pursue fair lending cases and give it to Blankenstein.

A chorus of CFPB veterans backed rallied behind Ficklin. The president of the National Treasury Employees Union (NTEU) asked Mulvaney late Monday to fire Blankenstein, echoing calls from Sens. Elizabeth WarrenElizabeth Ann WarrenBiden says he won't legalize marijuana because it may be a 'gateway drug' Democrats seize on report of FedEx's Elizabeth Warren tax bill to slam Trump's tax plan Warren 'fully committed' to 'Medicare for All' MORE (D-Mass.) and Sen. Sherrod BrownSherrod Campbell BrownOn The Money: Trump asks Supreme Court to block Dem subpoena for financial records | Kudlow 'very optimistic' for new NAFTA deal | House passes Ex-Im Bank bill opposed by Trump, McConnell Warren, Brown press IRS on study reviewing Free File program Sunday shows — New impeachment phase dominates MORE (Ohio), the ranking Democrat on the Senate Banking Committee.

“There should be zero tolerance for comments that Blankenstein has admitted authoring and nothing else than swift and decisive action is called for,” NTEU President Anthony Reardon wrote in a Monday letter to Mulvaney.

Gail Wisely, president of the CFPB’s NTEU chapter, also called for Blankenstein's firing in a late-night Monday email, adding that minority employees working under the fair lending chief are now experiencing a "hostile environment."

Blankenstein on Monday sent his own message to bureau employees saying he regrets the writings and insisting that “poor judgement in my choice of words back then, or how I framed my arguments, does not make me a racist or a sexist.”

Mulvaney and his top aides are also sticking by Blankenstein.

In an email Tuesday night, Mulvaney insisted that Blankenstein would not be fired or reassigned.

“I recognize that this is not the result that some of you may have wanted. But I stand by my decision and will proceed accordingly,” he wrote in a message to all agency employees.

Mulvaney insisted that the "merits of the changes" to the agency he had proposed "remain the same as they did when I announced the reorganization several months ago."

The CFPB senior official said that while some employees have been empowered by the revolt, there’s widespread frustration nothing would be done to address their concerns.

“There seems to be this sentiment here that nothing will come of this, that leadership will not deal with the issues being raised and will just sweep this under the rug,” the official said, earlier Tuesday, before Mulvaney's remarks.

The CFPB declined to comment for this article.

The blow-up over racial issues comes at a pivotal crossroad for the CFPB and its handling of discrimination claims.

Mulvaney has questioned whether banks and lenders should be penalized for practices that unintentionally harm minority groups or vulnerable populations. He asked the CFPB in May to review whether bringing such cases based on “disparate impact” is appropriate, earning praise from the financial industry and scorn from fair-lending advocates.

Mulvaney has also praised lawmakers for repealing the CFPB’s 2013 guidance on “dealer markups,” the interest a car dealer adds to a third-party loan arranged for the customer.

The bureau’s previous Democratic leadership used the memo to sue several auto companies and lenders for millions of dollars, claiming they gave minority customers higher markups than whites with similar credit profiles. The financial services industry and its Republican allies praised President TrumpDonald John TrumpTrump reversed course on flavored e-cigarette ban over fear of job losses: report Trump to award National Medal of Arts to actor Jon Voight Sondland notified Trump officials of investigation push ahead of Ukraine call: report MORE’s repeal of the measure in May, while Democrats and fair lending groups blasted the move.

The CFPB is also facing deep divides over its fair lending enforcement.

But concerns over race go beyond just the agency's policies. The bureau, under its previous director, Richard CordrayRichard Adams CordrayDemocrats jump into Trump turf war over student loans Supreme Court agrees to hear challenge to consumer agency On The Money: Tax, loan documents for Trump properties reportedly showed inconsistencies | Tensions flare as Dems hammer Trump consumer chief | Critics pounce as Facebook crypto project stumbles MORE, saw numerous allegations of racial discrimination lodged by employees.

The agency is facing a lawsuit from several former employees alleging that, since 2011, top CFPB officials gave white employees better pay and higher priority cases than minorities. The former employees also allege that they were retaliated against for filing formal complaints about these issues.

The controversy over Blankenstein is shining a light on those issues. Agency advocates hope that officials will seize the opportunity to address their concerns.

“People are believe that now is the time to confront that and have an active dialogue with employees and leadership about these issues,” said the senior CFPB official.