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Those consequences began to be imposed in earnest a little over a year ago by the Justice Department. It created the Fair Lending Unit, comprised of 20 lawyers, economists and statisticians headed by Special Counsel for Fair Lending, Eric Halperin. Halperin answers to Civil Rights Division chief Tom Perez, who likened lending institutions to the Ku Klux Klan. The unit began pursuing lending institutions in earnest. Government prosecution has now procured more than $550 million in rebates, loan set-asides and other subsidies from banks, who would rather settle than battle government bureaucrats and their media cheerleaders, all of whom would inevitably brand the resisting institutions as racist.
Wells Fargo is the latest bank to settle with the feds, to the tune of $175 million. And like many other lending institutions it must “prominently display” a notice informing minority customers that they cannot be turned down for loans just because they are receiving public assistance, including unemployment benefits, welfare payments or food stamps. “It is illegal to discriminate in any credit transaction,” the court-mandated poster says, “because income is from public assistance.” As part of the settlement, Well Fargo must set aside $50 million for down-payment and closing-cost assistance for minority borrowers, including “Borrower Assistance Grants” of up to $15,000 per individual. It must also rewrite loan pricing policies, fire mortgage brokers, put managers and loan officers through “equal credit opportunity training” and create programs to assist minority home buyers.
Yet the most mind-boggling part of the settlement is the $125 million portion set aside to compensate as yet unidentified victims of discrimination. If those victims can’t be found? The cash must then be given to government-approved community organizing groups.
To that end, millions of dollars extracted from Wells Fargo, Bank of America, and other lending institutions have been put into escrow. Adding insult to injury, Wells Fargo, which announced it settled “solely for the purpose of avoiding contested litigation with the Department of Justice,” received an “outstanding” grade in its last Community Reinvestment Act (CRA) exam. The CRA is an “anti-redlining” law that measures bank lending performance in minority neighborhoods. Thus, even an outstanding score on the exam is apparently insufficient proof of even-handed lending practices.
Moreover, bank regulators are in the line of fire as well. The CFPB has hired a new director for its Office of Minority and Women Inclusion tasked with promoting diversity at every federal agency regulating banks, private contractors and financial firms. The CFPB will also collect race-based lending data by banks to small-businesses. All of these changes have been authorized by the Dodd-Frank banking bill, with Congressional Black Caucus member Rep. Maxine Waters (D-CA) authoring the raced-based hiring standards for the regulatory bodies. Waters claims the changes are necessary in order to change the composition of “white male-dominated Wall Street.”
All of these machinations are little more than government-sanctioned extortion. Using ill-defined and/or unsubstantiated accusations of discrimination as their vehicle, the CFPB is pursuing Barack Obama’s pledge to “spread the wealth” around, oblivious to the overwhelming irony that it was precisely this kind of quota-mongering that disproportionately devastated minority borrowers the last time it was implemented. In essence, the Obama administration is turning home ownership into an affirmative action program. Sound lending principles are being undermined by government — again — in favor of the same feel-good practices that were the beginning of the end for the housing market the last time.
During that meltdown the banks, realizing that government would force them to make questionable loans in the sub-prime market, expanded the irresponsible practices to the entire mortgage market. Then they bundled the loans together and sold them to investors worldwide. When the market tanked, so did the economy, and taxpayers were left holding the bag in order to “save” the entire financial system. Yet as far as this administration is concerned, one global meltdown was not enough. In a society where the entitlement mentality has run amok, they have unilaterally determined that access to credit is a right, one where “diversity,” “fairness” and “social justice” count just as much — if not more — than one’s ability to handle loan payments. That is fiscal insanity enforced by government fiat.
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