Holder To Banks: You're All Bigots
Power Abuse: According to this administration, the nation's largest mortgage lender —Wells Fargo — and dozens of other banks are racist. Don't believe it: They're targets of a massive witch hunt.
Attorney General Eric Holder has also added SunTrust Bank, one of the country's largest home lenders, and Bank of America to his ever-growing list of bank bigots.
Some 60 other lenders are said to be under investigation for allegedly denying blacks and Latinos home loans solely due to the color of their skin; or for allegedly "steering" them into higher-cost subprime mortgages when they could have qualified for prime loans.
Holder in essence has smeared the entire banking industry as racist, a pernicious lie of monumental proportion — and one that's helping trial lawyers and housing-rights zealots justify a bigger shakedown of the industry.
The Wells Fargo case "really lays bare the kind of discrimination that was going on in the run-up to the financial crisis," said Bill Sermons, chief researcher for the leftist Center for Responsible Lending, which is working closely with Holder's prosecutors.
Holder is turning the public against banks, eroding confidence in the financial sector. He's also eroding, further, the time-tested credit standards underpinning the economy.
Among other things, he's ordered bank defendants to "modify" their lending policies to approve more minorities, regardless of their creditworthiness. He's also forced them to open branches in depressed urban areas, regardless of profitability.
Wells, for one, must devote at least $50 million to down-payment assistance for homebuyers in predominantly minority areas of Chicago, Baltimore, Detroit, Miami, Oakland, Cleveland, Philadelphia and Washington, D.C.
Thanks to a raft of settlements, Holder hasn't had to prove his charges in court. Of the nearly 20 major settlements he's wrung out of banks so far, he hasn't produced material evidence of lending discrimination in any of them.
The Wells Fargo case is emblematic. After a three-year investigation, Holder accused Wells of charging blacks and Latinos a "racial surtax" for wholesale subprime mortgages. But like the Bank of America and other cases, the charges appear groundless, for the following reasons:
1. Justice's 37-page complaint covers the period 2004 to 2009, yet Wells ceased making wholesale subprime loans in July 2007.
2. Over the same period, Wells scored "outstanding" grades on its Community Reinvestment Act exams conducted by federal regulators, who monitor bank lending in minority areas and work closely with Justice prosecutors. Wells set aside more than $110 billion in mostly low-interest loans for minorities as part of so-called CRA loan commitments.
3. In the 29-page consent order, Wells denies discriminating against minority borrowers and insists that an internal review of its loan files proves its subprime borrowers had "significantly weaker credit characteristics" than its prime borrowers. Black, white or brown, they would not have qualified for prime loans.
4. In approving loan products, originators followed published underwriting guidelines and weekly "rate sheets" pegging prime and nonprime interest rates to credit scores—the higher the score, the better the rate, and vice versa. They also followed an automated checklist, "Enhanced Care Filter," to prevent "steering" a prime candidate into subprime.
5. Wells also asserts that the government failed to conduct "an appropriate analysis" of its loan data. As in other cases, prosecutors drew their conclusions from statistical analyses showing "disparities" in loan pricing by race.
But the computer models — which were developed by a former top Center for Responsible Lending official — do not control for all credit risk variables. The former official, Eric Halperin, has long had it out for banks; yet he now serves as Justice's lead prosecutor for "fair lending."
6. The complaint fails to identify a single "victim" of lending discrimination; and, in fact, asks Wells to "assist in identifying allegedly aggrieved persons." Nor does it cite any internal bank communications, such as emails, showing willful intent to discriminate against blacks or Latinos.
7. The complaint cites as prima facie evidence of discrimination data showing that black borrowers were almost three times more likely to be placed in a subprime loan by Wells than whites; while Latinos were almost twice as likely to get a subprime loan than whites.
However, the disparities simply track Federal Reserve data showing similar disparities in creditworthiness between blacks and whites and Hispanics and whites.
8. If Wells is indeed bigoted, it would logically follow that it would discriminate against all minorities, not just blacks and Latinos. Yet prosecutors failed to investigate whether Asian borrowers also were victimized.
Why? Likely because Wells' lending data would mirror national data showing that Asians, on average, get the best deals on loans, better even than whites. (Fed studies show Asians tend to have the best credit and default the least of all racial groups, and therefore tend to pay the lowest rates and fees on mortgages.)
If Holder had included the Asian cohort, it no doubt would have severely undercut his case for lending discrimination.
The charge that Wells Fargo is a racist institution is preposterous. So why did it agree to settle? "Solely for the purpose of avoiding contested litigation with the Department of Justice," the bank said. Not to mention avoiding brand damage from boycotts and negative media orchestrated by Holder.
Until a defendant summons the spine to fight back in court, Holder will only grow bolder in his persecution |
