WASHINGTON/KANSAS CITY, Mo. (Reuters) - A U.S. probe found systemic racial bias targeted blacks and created a “toxic environment” in Ferguson, Missouri, but cleared a white officer in the fatal shooting of an unarmed black teenager there, Attorney General Eric Holder said on Wednesday.

The report said the St. Louis suburb overwhelmingly arrested and issued traffic citations to blacks to boost city coffers through fines, used police as a collection agency and created a culture of distrust that exploded in August when Ferguson Officer Darren Wilson fatally shot 18-year-old Michael Brown.

“This investigation found a community that was deeply polarized; a community where deep distrust and hostility often characterized interactions between police and area residents,” Holder told reporters.

Brown’s killing touched off a national debate on race, led to months of street protests and amplified long-standing complaints in Ferguson and across the country of police harassment and mistreatment of minorities. It also prompted Justice Department probes.

“Of course, violence is never justified,” Holder said. “But seen in this context, amid a highly toxic environment, defined by mistrust and resentment, stoked by years of bad feelings, and spurred by illegal and misguided practices, it is not difficult to imagine how a single tragic incident set off the city of Ferguson like a powder keg.”

Holder, who is stepping down soon as attorney general, called for wholesale and immediate change in the way Ferguson operates.

City officials said they would address the report later on Wednesday.

In a city where blacks make up about two-thirds of the population, they accounted for 85 percent of the total charges brought by Ferguson police, and more than 90 percent of arrests, Holder said, citing city records reviewed for the report.

Some police would compete to see who could issue the most citations to African-Americans, he said. Often the charges were trumped up, or fictitious. Police and city officials laced their emails with racist jokes, Holder added.

The city also looked to double its revenue in fines collected by the courts to a projected $3 million for its 2015 fiscal year, from over $1.3 million in 2010, he said.

“Ferguson police officers issued nearly 50 percent more citations in the last year than they did in 2010 – an increase that has not been driven, or even accompanied, by a rise in crime,” Holder said.

NEW CALLS FOR POLICE CHIEF’S RESIGNATION

The report also led to fresh calls for Police Chief Tom Jackson and the city’s mostly white leadership to step down.

Ferguson Officer Darren Wilson is pictured in this undated evidence photo. REUTERS/St. Louis County Prosecutor's Office

“He absolutely should not have that job anymore,” said St. Louis-area lawyer Brendan Roediger, who has helped represent some of those protesting police actions.

U.S. officials confirmed on Wednesday they could not find a civil rights reason to prosecute Wilson, who was not charged by a grand jury in Missouri for the shooting.

Lesley McSpadden and Michael Brown Sr., parents of the slain teen, said the decision not to pursue federal charges against Wilson disappointed them but the report could cause changes in Ferguson and other parts of the country.

“If that change happens, our son’s death will not have been in vain,” they said in a statement.

Jeff Roorda, a spokesman for the St. Louis Police Officers Association, said rather than blaming racial bias, there should be a “mature, frank conversation in the country about why kids like Michael Brown ... end up in deadly confrontations with police.”