Secretary Yellin should also re-assure CDFIs who had the courage to speak up against Director Harris’ dangerous new rules for the protection of America’s underbanked that they will not be retaliated against by the CDFI Fund through targeted exams, punitive grant decisions, or otherwise.
There is increasing word that Director Harris’ CDFI Fund has engaged (and continues to engage) in targeted reprisals in order to attempt to pass new rules without public objections. For instance, whistleblowers are requesting the Treasury’s Office of Inspector General investigate new, inappropriate policies the CDFI Fund and its office of Financial Strategies & Reporting has imposed on CDFIs that have raised objections to the CDFI Fund’s proposed rules. For instance, in one situation, the CDFI Fund has refused to credit a CDFI for lending to Black borrowers, when the borrower is in fact Black but does not also live in a community that is at least 70% Black. The CDFI Fund is basically claiming that only lending that promotes segregation will qualify, and if a Black borrower moves to an integrated community they are no longer considered Black by the CDFI Fund.
Such punitive policies are not only antithetical to the purpose of the CDFI Fund and statutory requirements but appear to be being applied in a retaliatory manner – that is, the CDFI Fund is only applying these rules to CDFIs who exercised their first amendment rights to object to CDFI Fund’s disastrous proposed rulemaking. It is not legal to punish the makers of public comments with punitive regulatory actions. The Treasury Department must ensure that CDFIs and other financial institutions are willing to participate in the statutory process as outlined by the Administrative Procedures Act without pressure, intimidation, or retaliation.
Fortunately, Director Jodie Harris recently submitted her resignation from the CDFI Fund and will be leaving office soon. The Treasury Department now has the ability to replace Director Harris with a professional Director who understands consumer lending, the responsibility of the CDFI Fund versus those of regulators such as the Consumer Financial Protections Bureau and banking regulators, and who will usher in a new spirit of community lending – not to build obstacles intended to fortify the structural inequities that already infect consumer lending.
It is critical that a new, permanent replacement is appointed as the Director of the CDFI Fund. New leadership has the potential to move past the ill-conceived rulemaking and retaliation that has defined Director Harris’ tenure.