Holder Wants Banks to Stop Discriminating

It seems they discriminate against borrowers with bad credit, which Eric Holder sees as massive civil rights violations. This kind of thinking was instrumental in Fannie Mae's influential MyCommunity Mortgage program and accompanying software that gave the Federal imprimatur to ninja loans. How could any regulator criticize loans its own agency was encouraging at Fannie Mae? How could any investor doubt loan criteria vetted by the historically low-risk Fannie Mae? They didn't. It didn't cause the crisis, but it was a leading cause.

Last month, the Supreme Court ruled that the Wal-Mart class action suit had to be refocused, but the opposing side said mere statistical disparity and anecdotes were sufficient and they only lost 5-4. If statistical disparities and anecdotes are proof of malfeasance it's hard to see any large organization not in violation.

A Department of Justice spokesperson named 'Xochitl' (demi-god spawn of Chthulu?) explained they are trying to make sure banks behave in methods that are sure to create a vast array of convoluted regulations, because it would be suicide for banks to not discriminate on the basis of creditworthiness, and impossible for this to not have disparate impact on historically disadvantaged minorities. From the IBD:

As part of settlement deals, prosecutors have required banks to sign "nondisclosure agreements" barring them from talking about the methods used to allege discrimination. Bank lawyers contend the prosecutors are trying to hide the shaky legal grounds on which the cases are built. "It's horrible what they're doing at the civil rights division," said Reginald Brown, a partner at Wilmer Hale in Washington, who has represented banks in connection to recent race-bias investigations. "They don't have any proof, just theories."

He added, "They want you to sign something saying you agree, under the condition of any settlement with them, that you won't disclose what their theories were. That's because their theories are loopy and wouldn't stand the light of day."

One such theory — "disparate impact" — holds that merely a difference in loan application outcomes is enough to prove racial discrimination — even if no intent exists on the part of loan officers to contrast based on the color of applicants, and even legitimate business factors — such as credit scores and down payments — help explain disparities in loan outcomes between white and black applicants.

And just in case you think I'm being paranoid about the race card being thrown around, consider this choice quote:

In announcing a recent $2 million settlement with Dallas-based PrimeLending, Civil Rights Division chief Tom Perez said, "We will require lenders to invest in the community that they've harmed."

Another Reno protege, Perez has compared bankers to Klansmen. Only difference is, he said, bankers discriminate "with a smile" and "fine print." He said this kind of racism, though more subtle, is "every bit as destructive as the cross burned in a neighborhood."