Where do you get this - from American Witness: The Art and Life of Robert Frank by RJ Smith ? The author did not have any direct access to Frank and it' s an unauthorized biography.
Yes it does seem a strange reason to reject him. It's the kind of reason, true or otherwise, that is used to sell newspapers. It seems to belong to the "headline grabbing" school of journalism
Good he was rejected (though may I doubt he ever applied?), ... praise to the egg or whatever other reason
So he moved on his own ways. Wonderful film on Arte.tv : Blicke in die Seele Amerikas. Der Fotograf Robert Frank (Glances into America's Soul. The Photographer R F)
Link: https://www.arte.tv/de/videos/050350-000-A/blicke-in-die-seele-amerikas/ (set language to original at bottom)
Enjoy!