Justice's New War Against Lenders ( Community Reinvestment Act Pt. II )

Talk about not learning from past mistakes: A government department is again intimidating banks into lending to minority borrowers at below-market rates, all in the name of combating "discrimination." Welcome to the next housing mess.

...Eric Holder's Department of Justice is taking the game to an entirely new level, and then some. The weapon is a "fair lending" unit created in early 2010, led by special counsel Eric Halperin and overseen by Civil Rights Division head Thomas Perez.

...But Justice is on a roll. In less than two years, the government has settled with AIG ($6.1 million), PrimeLending ($2 million), Midwest BankCentre ($1.5 million) and Citizens Republic Bancorp ($3.5 million), to name a few. More cases are in the hopper, and bigger banks are now in Justice's sights.

The Justice Department—or the bank, with the long arm of Justice hanging over it—chooses where that money goes. A Michigan judge even went so far as to call one proposed settlement "extortion." He might be onto something.

The Wall Street Journal today writes about how the Obama administration is repeating the “mistakes of the past by intimidating banks into lending to minority borrowers at below-market rates in the name of combating discrimination.” Assistant Attorney General for Civil Rights Thomas Perez has argued that bankers who don’t make as many loans to blacks as whites (because they make lending decisions based on traditional lending criteria like credit scores, which tend to be higher among white applicants than black applicants) are engaged in a “form of discrimination and bigotry” as serious as “cross-burning.” Perez has compared bankers to “Klansmen,” and extracted settlements from banks “setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit,” treating welfare “as valid income in mortgage applications” and providing “favorable interest rates and down-payment assistance for minority borrowers with weak credit,” notes Investors Business Daily.

Under Perez’s “disparate impact” theory, banks are guilty of racial discrimination even if they harbor no discriminatory intent, and use facially-neutral lending criteria, as long as these criteria weed out more black than white applicants. The Supreme Court has blessed a more limited version of this theory in the workplace, but has rejected this “disparate impact” theory in most other contexts, such as discrimination claims brought under the Constitution’s equal protection clause; discrimination claims alleging racial discrimination in the making of contracts; and discrimination claims brought under Title VI, the civil-rights statute governing racial discrimination in education and federally-funded programs. Despite court rulings casting doubt on this “disparate impact” theory outside the workplace, the Obama administration has paid liberal trial lawyers countless millions of dollars to settle baseless “disparate impact” lawsuits brought against government agencies by minority plaintiffs, even after federal judges have expressed skepticism about those very lawsuits, suggesting that they were meritless.

Fearing bad publicity from being accused of “racism”, banks have paid out millions in settlements after being sued by the Justice Department, even though they would probably prevail before most judges if they aggressively fought such charges (although doing so would probably cost them millions in legal fees). A Michigan judge called one proposed settlement “extortion.” These settlements provide cash for “politically favored ‘community groups’ ” allied with the Obama Administration, and the Journal’s Mary Kissel predicts that “many” of the loans mandated by these settlements “will eventually go bad.”

The banks accused of “racism” by the Obama administration include banks that were previously praised by non-political government agencies for their success in minority outreach and lending to minorities in regions in which they did business. For example, the Obama administration is suing Cardinal Financial Corp., even though “the FDIC in the past gave kudos to Cardinal for its lending practices. Justice is now accusing Cardinal of failing to open branches and achieve racial loan quotas in counties that its federal regulator never before contended should be the focus of its lending,” arguing that it was not enough for the bank to make loans to minority applicants who applied for loans, and that it had an affirmative duty to open new branches in heavily-black areas it had never done business in before.

The Obama administration’s demands suggest it learned nothing from the financial crisis, which was caused partly by “diversity” mandates and affordable housing mandates that encouraged lending to people with bad credit scores who later defaulted on their loans. Banks were under great pressure from liberal lawmakers to make loans to low-income and minority borrowers. For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers,” The New York Times noted. As The Washington Examiner noted, the government also “encouraged riskier mortgage lending by minimizing the role of credit histories in lending decisions, loosening required debt-to-equity ratios to allow borrowers to make small or even no down payments at all, and encouraging lenders the use of floating or adjustable interest-rate mortgages, including those with low ‘teasers.’” The liberal Village Voice previously chronicled how Clinton administration housing secretary Andrew Cuomo helped spawn the mortgage crisis through his pressure on lenders to promote affordable housing and diversity. “Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments.”

Financial analysts at major investment banks have recently recognized that these government mandates played a bigger role in the financial crisis than previously thought. Former financial executive Ed Pinto has chronicled how the government promoted the risky non-traditional mortgages that defaulted in huge numbers. A recent book co-authored by The New York Times’ Gretchen Morgenson chronicles how federally-promoted lower lending standards spawned the financial crisis, and put minority borrowers into homes they could not afford.

The Obama administration is also considering a massive new bailout that would increase the cost to taxpayers of Fannie Mae and Freddie Mac, the Government-Sponsored Enterprises (GSEs) whose bailout has already cost taxpayers more than $160 billion that will never be repaid (and will probably wind up costing at least $400 billion)

http://www.openmarket.org/2011/08/31/obama-justice-department-forces-banks-to-make-risky-loans-planting-the-seeds-of-a-future-financial-crisis/

Ha, funny.

Let`s not forget Barry ( with ACORN ) cut his teeth suing Citibank in regards to loans not being made based on “race” :

“In a 1995 case known as Buycks-Roberson v. Citibank, Obama and his fellow attorneys charged that Citibank was making too few loans to black applicants and won the case. As one commentator noted in May 2008, legal “successes” such as this were probably responsible for the sub-prime mortgage crisis of 2007 AND 2008. That is, banks were not loaning to blacks whose credit was poor. When the law forced them to lend money anyway, the inevitable collapse occurred.”

Obama had a part in the lawsuit that started the government on a course of forcing lenders to give more loans to those who had poor credit. Lending companies were forced to come up with imaginative ways of fulfilling the quota that was required. Sub-prime lending was born as a result. The mortgage crises was forecast by many who were able to look beyond the quota.

This New York Times article (.pdf) clearly forecast the mortgage meltdown...

http://theobamafile.com/ObamaACORN.htm

"Talk about not learning from past mistakes: A government department is again intimidating banks into lending to minority borrowers at below-market rates, all in the name of combating "discrimination." Welcome to the next housing mess."

The lesson that needs to be learned is that the White House is in all reality the "anti-white House".

I said right from the get go that Obama isn't a 'socialist' because that's his political preference. He's a socialist because it's the most effective and politically expedient way to screw those "rich white people" the Rev. Wright railed against in Obama's so-called "church". If you consider yourself "black", no matter that your mother is white, and you want payback for slavery, and you happen to be the President of the United States, SOCIALISM is the way to get the job done, through the redistribution of the wealth, or simply stealing it through taxation and making sure that most of it goes to assist those "poor oppressed sons and daughters of slaves" that we "crackers" are responsible for. I think of Obama economics as "reparation economics".

If white people vote for this racist, biggotted thug again it will represent the largest group of masocists on earth.

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