Investors.com reported yesterday that Eric Holder's Justice Department has asked several major banks to relax their lending standards in order to make home ownership available to more Americans. This is part of the Justice Department's new crackdown on alleged discrimination, which so far has netted the government more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist. Sounds like Chicago politics to me.
The article reports:
"Justice spokeswoman Xochitl Hinojosa said the anti-discrimination notice "does not compel the banks to make loans to people who do not qualify." She said such measures are "essential to remedy the harmful effects of the banks' conduct."
"But industry analysts fear Attorney General Eric Holder is rekindling an anti-bank witch hunt launched by Attorney General Janet Reno in the 1990s, when Holder served as her deputy.
"Some blame that in part for the subprime boom, because banks were ordered to throw open their lending windows to credit-poor minorities. That crackdown spurred the American Bankers Association to distribute to its thousands of members "fair-lend ing tool kits" advising the adoption of more permissive underwriting criteria to help inoculate them from prosecution."
Refusing to lend money to someone who cannot pay it back is not discrimination--it's good business!
The article further reports:
"Justice confirmed it has asked banks to keep its methodologies, which include computer-based statistical analysis, secret.
""In certain circumstances, when a bank has requested details of our analysis, the department has requested that a defendant agree to a confidentiality agreement," Hinojosa told IBD.
"Critics say Holder's interpretation of civil-rights law is even more radical than Reno's.
"For the first time, prosecutors are judging banks for the secondary impact their policies have on entire minority communities, not just households. And they're ordering reparations accordingly.
"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."
"Perez has put in place an infrastructure to enforce "fair lending" -- including a first-of-its-kind Fair Lending Unit staffed with more than 20 lawyers, economists and statisticians."
Making bad loans to a minority community does not help anyone. Houses become vacant and everyone suffers. What is needed here is a healthy dose of common sense.
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