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One is left to wonder how such secrecy squares with remarks made by Thomas Perez at Heritage, where he promised that the Justice Department will “continue its practice of building accountability into agreements…requiring transparency so that communities can monitor the progress being made.” Even more so, when Sperry notes that “Justice acknowledges in every case it did not prove charges of intentional discrimination, while banks have denied any wrongdoing.” He further notes that the department “has asked banks to keep its methodologies, which include computer-based statistical analysis, secret.” Justice has confirmed the allegation. “In certain circumstances, when a bank has requested details of our analysis, the department has requested that a defendant agree to a confidentiality agreement,” DOJ spokeswoman Xochitl Hinojosa told IBD.
What else is being kept a secret? For one, the list of “qualified organizations” Perez has required defendant lending institutions to bankroll with millions of dollars in funding, as part of the settlement agreements. One case in particular involved Midwest BankCentre, a small bank which has been operating in the suburbs of St. Louis for over a century. They are reportedly settling a case with the DOJ for failing to open branches or issue mortgages in minority areas. $1 million dollars is reportedly being set aside for African American applicants “who would ordinarily not qualify for such rates for reasons including the lack of required credit quality, income or down payment.” The organization which brought pressure on the bank? A community activist group calling itself the St. Louis Equal Housing and Community Reinvestment Alliance. Such pressure is reminiscent of the tactics that now-discredited ACORN and other community activist groups used to shakedown lending institutions prior to the housing crisis.
Such concessions are made possible by a sea-change in the Justice Department’s approach to prosecution. Rather than being held liable for particular loans they haven’t made to individual households, banks are being judged for the “secondary impact” such refusals have on an entire neighborhood. Thus, when First United Security Bank in Alabama settled with the DOJ in 2009 for alleged discriminatory practices, stipulations to fund community reinvestment and education programs were part of the deal. These included $600,000 to open a new branch in an African American neighborhood, $500,000 for a special financing program, and $110,000 for outreach to potential customers in the unserved areas.
And such considerations of secondary impact are not limited to mortgages. The DOJ is planning to extend their scrutiny into credit cards, auto loans, and even loan modification programs. Any violations which appear to be pattern-like will be referred to DOJ for prosecution based on a concept called “disparate impact.” Disparate impact is defined as a “facially neutral practice that has an unjustified adverse impact on members of a protected class.” What does this mean with respect to litigation? Buckley/Sandler lawfirm co-chairman Andrew Sandler explains. “Perez is going to depend on disparate impact theory, where the intent [to discriminate] does not have to be proven,” he says.
But it gets even crazier. On one hand, it is against the law for banks to compile data on race, gender or age for nonmortgage loan applications. On the other hand, the Home Mortgage Disclosure Act requires the compilation of such data. Crazier still? “[DOJ is] expecting each bank to have a fair-lending risk assessment,” says Carl Pry, vice president and compliance manager at KeyBank in Cleveland. “That is something relatively new–you won’t find it either in the regulations, in the statutes, and not in any of the exam procedures.”
So what does the DOJ expect banks to do? Collect “proxy data,” in which they amass minority applicant information based on “geocoded neighborhood patterns, or guesswork based on gender or racial classification of a customer’s name” in order to determine if an applicant falls into a protected class. Such guesswork produces error rates as high as 40 percent in mixed neighborhoods. Furthermore, Mike Brauneis, director of regulatory risk consulting for Protiviti, a global consulting and internal audit firm, reveals the Orwellian nature of such data compilation. “If we do an analysis and it suggests that fair-lending risk exists, those analyses can themselves be risks,” he said.
That such questionable data coupled with unprovable intent would be used by the racial bean-counters at that DOJ should surprise no one. It is merely the next link in the chain behind the department’s utter illogic of simultaneously blaming lending institutions for irresponsible lending practices that propelled the housing meltdown, even as they are arm-twisting those institutions to engage in them all over again.
Added to the Fast and Furious gunrunning scandal, and the failure to prosecute Black Panthers intimidating Philadelphia voters — a case which also included sworn testimony of systemic abuse by the department’s Voting Rights Section — and a very disturbing pattern emerges. Attorney General Eric Holder is running a Justice Department that is abusive, out of control, and possibly racist. It is also a department more than willing to stonewall any investigation into its operational methods. Any one of these abuses on its own would be enough to warrant Mr. Holder’s resignation. All three? Mr. Holder is either incompetent or corrupt.
Either way, it’s time for him to go.
Arnold Ahlert is a contributing columnist to the conservative website JewishWorldReview.com.
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